- US stocks surged at open with Dow Jones rising over 1,000 points on election news
- Democrats won majorities in both House and Senate in US midterm elections
- S&P 500 and Nasdaq also gained 1.21% and 1.12%, respectively
US stocks surged at the opening bell on Wednesday, with the Dow Jones Industrial Average soaring more than 1,000 points as investors welcomed a decisive Democratic victory in the US midterm elections and President Donald Trump's acceptance of the results.
However, the broader market rally did little to lift sentiment towards artificial intelligence stocks, which came under pressure amid concerns over potential restrictions on data centre expansion.
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Dow Jones Industrial Average jumped 1,166.66 points, or 2.25%, to 52,953.38. The S&P 500 advanced 91.73 points, or 1.21%, to 7,660.65, while the Nasdaq Composite climbed 284.66 points, or 1.12%, to 25,656.67.
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The sharp gains followed a resounding Democratic victory, with the party securing majorities in both the House of Representatives and the Senate, alongside key gubernatorial wins, including Texas. The outcome is expected to place greater political checks on Trump's policy agenda, which has combined business-friendly tax cuts with tariffs and military action in Iran that have contributed to inflationary pressures.
Trump's response to the election results also helped calm investors. He told The New York Times that he was absolutely willing to accept the outcome and indicated to The Wall Street Journal that he and Republicans would work with Democrats.
Jay Woods, chief market strategist at Freedom Capital Markets, said the initial reaction from the president had contributed to the market's positive response.
"Still more uncertainty looms, but one thing is certain, there will be gridlock and historically this is good for the market," Woods said.
Stocks linked to the broader economy led the early rally as investors looked beyond technology for opportunities. Walmart shares gained around 2%, while Bank of America advanced 1.9%.
Healthcare stocks also moved higher, with UnitedHealth gaining 1.4%, Molina Healthcare rising 6.3%, Centene climbing 4.7% and HCA Healthcare advancing 1.44%. The Invesco Solar ETF jumped 5%, reflecting optimism around the potential policy implications of the election outcome.
The rally, however, was not broad-based. Artificial intelligence-linked stocks faced selling pressure as investors assessed the possibility of tighter regulations on data centre development.
A major concern was the prospect of restrictions on new data centre projects, particularly in Texas, a key hub for the industry's infrastructure expansion. Democratic gubernatorial candidate Gina Hinojosa's victory in the state, alongside her pledge to impose an immediate moratorium on data centres, added to investor concerns.
Oracle and CoreWeave shares were headed lower, while Elon Musk's SpaceX, which is headquartered in Texas, also came under pressure.
Beyond the immediate election outcome, historical market trends offered another reason for optimism. Investors have often favoured divided government because political gridlock can limit sweeping policy changes and reduce regulatory uncertainty for businesses.
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Andrew Slimmon of Morgan Stanley Investment Management said markets "like gridlock, they don't like a party with too much power."
CNBC reported that Slimmon also suggested that the election outcome could strengthen efforts to resolve the Middle East conflict. A potential easing of tensions could bring oil prices lower, helping contain inflation and giving the Federal Reserve more room to manoeuvre.
West Texas Intermediate crude futures were down around 1% on Wednesday, adding to the positive backdrop for equities.
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