Dow Futures Rise 0.4% After Democrats Win Majorities in Both Houses of US Congress
Key Facts
Dow Jones futures rose 0.4% and S&P 500 futures gained 0.2% in early trading on Wednesday, November 4, after Democrats won majorities in both the Senate and House of Representatives in the midterm elections, according to the Associated Press. The gains followed an initial drop in futures as results came in, before they pared losses as investors assessed the impact of a shift in legislative control. Reuters reported that at 3:13 a.m. Eastern Time, E-mini Dow futures were up 237 points, or 0.46%, while E-mini S&P 500 futures rose 11.25 points, or 0.15%. E-mini Nasdaq 100 futures also gained 72.75 points, or 0.26%, at the same time. The readings show changing moves in early trading, while the Democrats' victory remained the main political factor in futures pricing.
Futures initially fell between 1% and 2.5%, with the Nasdaq leading losses amid continued pressure on technology stocks, Reuters reported. The agency said Nasdaq 100 futures fell as much as 2.4%, while S&P 500 futures dropped 1.4% after the results emerged. At 1:24 a.m. Eastern Time, all three contracts remained lower despite paring losses: S&P 500 futures fell 0.39% to 7,565.50 points. Nasdaq 100 futures dropped 0.6% to 28,135.0 points, while Dow futures slipped 0.18% to 51,801.0 points. In after-hours trading on Tuesday, AMD shares rose as much as 7% after quarterly results topped expectations and the company forecast fourth-quarter earnings above market estimates. The differing readings show futures pared their declines but remained sensitive to the election results and pressure on technology stocks.
The Associated Press said markets generally favor divided control of Washington between the two parties, as it is seen as limiting the likelihood of sweeping changes that could reshape the economy. But the Democrats' wins in both chambers give them greater legislative influence when Congress convenes, while Stephen Brown of Capital Economics said the result does little to change the near-term political outlook. Brown said Democrats "do not have a Senate majority capable of overcoming a filibuster," adding that the president has the power to veto legislation. These constraints limit what Congress can pass quickly, despite the shift in control of both chambers. Investors' assessment will depend on whether the new majority translates into tangible regulatory or tax changes.
Prospects for greater oversight of artificial intelligence and cryptocurrencies raised concerns in global markets, alongside debate over taxes and tighter regulation, Reuters reported. Aidan Yao of Amundi said restrictions on the AI sector could make the US economy, inflation and monetary policy "highly uncertain." Against that backdrop, Reuters said investors had grown more cautious about big technology companies' rising AI spending, with little evidence of adequate returns. Democrats also made gains in Texas and Georgia, two important states for data centers. The agency said residents' concerns there include data centers' environmental impact, energy costs and the technology itself. Regulatory bets therefore intersected with investor questions about the sector's spending and returns, as technology stocks were driving some of the pressure on futures.
Regional markets moved in different directions in early trading on Wednesday: Paris's CAC 40 rose 0.4% to 8,055.02 points, Britain's FTSE 100 gained 0.1% to 10,646.43 points, and Germany's DAX advanced 0.5% to 25,995.13 points. In Asia, Japan's Nikkei 225 fell 1.4% to 62,188.63 points, while Hong Kong's Hang Seng rose 1.5% to 23,888.46 points. The Shanghai Composite gained 2.2% to 3,686.17 points, rebounding from its lowest level of the year, recorded on Tuesday, according to the Associated Press. In oil markets, the agency reported Brent crude up 0.4% at $103.88 a barrel and US crude up 0.3% at $96.34. These moves show regional indexes heading in different directions as investors reassessed the impact of the election result.
US stocks were mixed in Tuesday's session, November 3, before the results were complete: the S&P 500 rose 0.4% despite most of its constituents falling, the Dow dropped 197 points, or 0.4%, and the Nasdaq Composite gained 0.8%, according to the Associated Press. EL7 data show the Dow Jones Industrial Average closed at 51,786.72 points that day. On the calendar, the euro zone's October preliminary inflation reading was scheduled for release on Wednesday, November 4. The Bank of England was also due to announce its interest rate decision on Thursday, November 5, according to the Associated Press. Alongside the data and decision, McDonald's, Arm, Qualcomm and Uber were set to report results on Wednesday, Reuters said. These events came as markets weighed the impact of the political result and pressure on the technology sector.