Wall Street rebounds after initial drop post-Democratic win

Nasdaq futures recover from a 2.4% drop; AI stocks face scrutiny amid political shifts

US stock futures experienced volatility on Wednesday as Democrats secured control of both chambers of Congress. The Nasdaq 100 futures initially dropped by 2.4% and S&P 500 futures fell by 1.4% during early trading. However, both indices recovered as investors took advantage of the dip, turning all three major indices positive. President Donald Trump’s acceptance of the election results helped reduce uncertainty among traders.

The 10-year Treasury yield decreased to approximately 4.9% after reaching a 24-year high of 5.3% the previous day. The dollar fell to a one-month low. Asian markets were more heavily impacted as the vote counting continued during their trading hours, with Japan’s Nikkei dropping nearly 3% and SoftBank plunging 8%. European markets also opened lower but quickly rebounded.

David Meier, an economist at Julius Baer, commented on the dollar index’s decline, suggesting only modest softness due to ongoing monetary policy and AI investments supporting the currency. He noted that markets anticipate increased regulatory scrutiny of the AI sector, which could affect capital inflows.

Mathieu Racheter, head of equity strategy research at Julius Baer, indicated that the Democratic sweep was partly priced in and highlighted the risk to valuations due to uncertainty over future taxes and regulation. He suggested that this uncertainty might become more significant as the next presidential campaign approaches.

Frank Walbaum, a market analyst at Naga.com, interpreted the election results as leading to a more constrained political environment. He noted that higher fuel prices linked to Middle East tensions have affected consumer sentiment. Walbaum also mentioned potential pressure on tech companies related to data center expansion under a Democratic Congress.

Louis Guy Detata, founder of UEXO.com, emphasized the importance of flexibility for businesses in light of the divided government, which may lead to legislative standoffs. He stated that the US-Gulf relationship remains strong, with ongoing investment in key sectors like technology and energy.

Source: https://gulfnews.com/business/markets/wall-street-wobbles-then-recovers-after-democratic-sweep-1.500735886