Wall Street has woken up to a divided Washington and decided it rather likes it. Six hours ago Nasdaq futures were sliding on fears that a Democratic sweep would choke off the AI build-out. Now all three US index futures are comfortably higher, the dollar sits near a one-month low and gold is back above $4,000. The one corner of the market that has not been forgiven belongs to Elon Musk.
The situation right now
S&P 500 futures are up about 1.1% near 7,684, Nasdaq 100 futures are around 0.9% higher and Dow futures lead with a gain of roughly 1.5%. That points to a firm start when US cash trading opens at 14:30 UK time. Europe has done the heavy lifting already, with the Stoxx 600 up about 1.5%, the DAX up 1.5% and the FTSE 100 up 1.2%. The VIX, Wall Street’s fear gauge, has dropped about 13% to near 18.
The reading of the result has settled into a simple idea. Democrats now control both the House and the Senate, which gives them a powerful check on President Trump for the final two years of his term. Markets tend to like a government that struggles to pass big new spending, and that is what investors think they are getting. Trump struck a conciliatory tone overnight, saying he would work with Democrats on many things and accepted the results.
What changed since this morning
At 5am the picture was ugly. Nasdaq futures were down more than 1.5%, the Nikkei was off more than 4% and the talk was of a blow to the AI trade. Tokyo pared that loss to about 1.4% by the close, and US futures have swung by roughly two percentage points from their lows. Gold has added another $90 or so since dawn, and the dollar has slipped further.
The fear has not gone away. It has narrowed. Instead of selling everything linked to AI, investors are now picking out the specific companies most exposed to the political shift.
The biggest US market story: the Musk discount
Tesla is down about 4.6% before the open and SpaceX is off around 5%. The damage came from Texas, where Democrat James Talarico beat Ken Paxton for a Senate seat and Gina Hinojosa unseated Governor Greg Abbott. Musk spent at least $474 million on the midterms, according to CNBC, with $224 million of it in Texas alone. Both of his listed companies are based in the state.
Texas matters to the wider AI trade too. Wells Fargo estimates that about 27% of planned US data centre capacity is in the state, and Hinojosa has backed a moratorium on new AI data centres. Dan Ives at Yorkville Ives described Texas as the biggest worry of the night for tech investors. Musk’s own reply on X was that data centres in space were looking pretty appealing.
Yet the big platforms are rising. Amazon is up nearly 3% pre-market, and Nvidia and Alphabet are each up about 1%. One argument doing the rounds is that slower approvals could give the hyperscalers a reason to rein in spending that some investors already thought was excessive. That is a market looking for the silver lining, and it may prove generous.
Stocks moving before the open
AMD is the standout, up about 5% to 7% after record third-quarter revenue of $13.38 billion, up 45% on the year. More importantly, it forecast fourth-quarter sales of about $17 billion and revenue growth above 80% in 2027 on data centre demand. That is the kind of number that calms nerves about AI spending, at least for one morning. Chief executive Lisa Su speaks to CNBC at 14:00 UK.
Super Micro Computer is up about 8% in sympathy. First Solar has jumped roughly 8% as investors look for policy winners from a Democratic Congress, and Duolingo is up about 15% on user growth and upbeat guidance. Novo Nordisk’s US-listed shares are up about 5% after Wegovy pill sales beat forecasts and the company raised its full-year outlook.
On the losing side, Skyworks Solutions is down about 15% after a weak outlook for its smartphone business. Northrop Grumman is off nearly 4%, a sign that investors expect tougher questions on defence budgets. Trump Media is down about 7%, Palantir is off 2.5% and CVS Health is lower by around 3% after confirming plans to split into two companies.
FX and the dollar
The dollar index is down about 0.5% near 101.4, around its lowest in a month. Euro-dollar is up 0.5% at about 1.1253 and sterling has climbed to around $1.348. A Congress that blocks new spending and big giveaways means less fresh borrowing, which takes some support away from the dollar. Dollar-yen is a touch lower near 158.4, with the yen among the better performers today.
Bonds
Treasuries are holding their overnight rally. The 10-year yield is near 4.93%, having touched about 4.89% earlier according to Reuters, while the two-year sits around 4.62%. The 30-year is slightly higher at about 5.30%, a small reminder that the deficit has not gone anywhere. UK 10-year gilt yields have eased to around 5.23% ahead of Thursday’s Bank of England decision.
Commodities
Gold is the clearest winner of the night. US gold futures are up close to 3% at about $4,053 an ounce, and silver has jumped more than 4.5% to around $52. A weaker dollar and lower yields make metals cheaper to hold, and a more uncertain Washington adds a safe-haven reason on top. Oil is going the other way. Brent is down about 1.3% near $102 a barrel and US crude is around $95, as traders weigh whether a weakened White House pushes harder for an end to the Iran war. Tehran’s parliament speaker said Americans had voted no to war.
Today’s remaining catalysts
ADP private payrolls land at 13:15 UK, with about 70,000 jobs expected after 90,000 last month. The final S&P Global services PMI follows at 14:45 and the ISM services survey at 15:00, where economists expect a reading near 54.7. US crude inventories come at 15:30. After the close, Arm and Qualcomm report, which will test whether the AMD mood carries over to the rest of the chip sector. The Bank of England decides on rates on Thursday.
Levels traders are watching
For the S&P 500, Tuesday’s close of 7,568.92 is the line that matters. A gap higher that fades back towards it would suggest the relief rally is thin. For the Nasdaq Composite, Tuesday’s close near 25,372 is the reference. In gold, $4,000 is now the round number to watch from above. For the dollar index, holding below 101.5 keeps the one-month low in play, and for Brent, $100 is the obvious psychological mark. Tesla’s reaction around Tuesday’s close of about $398 will show whether the Musk selling deepens or stabilises once US cash trading starts.
Where this leaves us
The balance of evidence leans cautiously positive for US stocks today. Futures have recovered sharply, volatility has fallen, bonds are rallying and AMD has given the AI trade a strong fundamental argument. The mood looks like relief that Washington will be harder to change, rather than excitement about anything new.
The weak spot is the very theme that frightened markets overnight. Texas is a big part of America’s data centre plans, and the selling in Tesla and SpaceX shows investors are already pricing political risk into specific names. The opportunity for patient traders lies in watching which AI stocks hold their gains once the cash session opens and which give them back. Chips with strong earnings, like AMD, may be treated very differently from companies whose growth depends on new data centres in hostile states.
The view would change if ADP or the ISM services survey surprises sharply, because a strong economy would push yields back up and take the shine off this rally. A slide in the S&P 500 back below Tuesday’s close, or Nasdaq futures turning negative again, would suggest the overnight fear was right after all. Disappointing results from Arm or Qualcomm tonight would also test the AI recovery.
The markets to watch are Tesla and SpaceX for political risk, AMD and the wider chip sector for AI demand, gold for haven appetite, the dollar for the policy read and Treasuries for the deficit. For beginners, today is a useful lesson in how quickly markets move from a broad panic to picking winners and losers. The first reaction to big news is often not the final one. If you want to understand how you would handle a morning like this, the Samuel & Co Trading Assessment is a good place to find out where your trading stands.
