Markets rallied on the prospect of nothing much getting done

Democrats flipped seven Senate seats on Tuesday, Texas among them, and are projected to hold at least 54. They took the House as well. President Trump said he would accept the results.

So why did Wall Street cheer a result it had not backed? Certainty, mostly. Stock futures fell on Tuesday night and had turned round before New York opened. The S&P 500's 1.58% gain was its second-biggest post-midterm move since 1982, and the NASDAQ's 1.44% its largest since 2018.

Gridlock is the other half of it. A Democratic Congress and a Republican president are unlikely to pass much between them. Deutsche Bank's analysts said that puts a brake on extreme policy and pulls risk premiums down.

Chart: Nasdaq jumps 1.44% on a divided Washington. The Nasdaq Composite's change on each trading day from 1 September to 4 November 2026, in percent; the last column is the day after the US midterm elections. — This story’s chart of the day: the numbers, the dark version and the animated version are on its own page. The chart’s page →

One corner of the market went the other way. Texas elected Democrat Gina Hinojosa governor by about seven points, and she campaigned on a moratorium on new data centres. Wells Fargo reckons the state holds about 27% of America's data centre capacity.

Power generators copped it. Vistra fell 13.88% to US$120.22 after a KeyBanc downgrade, and GE Vernova lost 9.31%. Modine, which makes the cooling gear data centres run on, fell 23.9%.

The other side

Microsoft, Amazon, Apple and Alphabet all rose between 4.5% and 6.3% on the same day, so nobody has written off the AI buildout. Our read is that the market has decided it just got dearer, and that the bill lands with whoever has to find the water and the power.

This story ran in The Gridlock Rally Thursday 5 November’s edition, with the market snapshot, the other two stories, the numbers and the week ahead. Read the whole edition →

More in

All stories →

Friday 6 November The AI trade came apart and pushed the NASDAQ Composite into a correction
Monday 19 October Seven of the S&P 500's 11 sectors rose last week, and the index still fell 1.95%

General information and commentary only, not financial advice. It does not take account of your objectives, financial situation or needs, and reflects the author's own reading of public information at the time of writing, which may be wrong. Sharespective, its people and its clients may hold positions in the companies covered. Do your own research and talk to a licensed adviser.