Wall Street reacted positively to the Democratic Party's victory in the midterm elections, with the Standard & Poor’s 500 index surging 1.6 percent, the largest one-day gain since August. The rally was driven by investor shifts favoring tech giants and penalizing energy stocks. However, the broader economic outlook remains tied to policies President Trump can pursue independently, such as immigration restrictions, tariffs, and potential escalations with Iran.
Oil prices dropped nearly 9 percent, reflecting expectations that a Democratic-controlled Congress would reduce the likelihood of further US attacks on Iran. Lower energy prices could boost consumer spending on other goods and services. Meanwhile, tech stocks like Amazon, Microsoft, and Alphabet saw gains of 7 percent, 4.8 percent, and 3 percent, respectively, as investors anticipated slower AI-related spending under Democratic leadership.
On the downside, chipmakers and construction firms faced sell-offs. The Philadelphia Semiconductor Index fell 4 percent, with Nvidia losing 3.2 percent and Micron Technology shedding 7 percent. Analysts noted a clear rotation out of energy and semiconductor stocks into tech giants. However, some cautioned that Trump’s stance on Iran remains uncertain, with potential for either restraint or escalation.
Mark Zandi, chief economist at Moody’s Analytics, emphasized that the economic outlook hinges on factors like immigration policies and oil prices, which Trump can influence regardless of Congress. The president acknowledged voter dissatisfaction with high gas prices but did not commit to policy changes.