U.S. stock futures recovered Wednesday morning after falling sharply earlier, as Democrats won key midterm races and projections pointed to the party taking control of both chambers of Congress.
Futures on the S&P 500 rose 0.35%, while Nasdaq-100 futures gained 0.16%. Dow futures were up 0.84%.
The results added to uncertainty among investors, who are weighing how a change in Washington’s balance of power could affect taxes, spending, artificial intelligence, major technology companies, defense, health care, banking and cryptocurrency rules.
Investors may be anticipating a stronger Democratic showing than expected, which could temper hopes for additional fiscal stimulus, said Charu Chanana, chief investment strategist at Saxo in Singapore. She also noted that concerns about tighter oversight of AI and Big Tech could weigh on sentiment, especially as questions grow around high valuations and rising AI spending.
Still, falling Treasury yields might offer some support, Chanana said, meaning the early market decline may not last. The 10-year Treasury yield slipped 6 basis points to 4.906%.
Past shifts in congressional control have not necessarily hurt stocks. The S&P 500 rose through the end of the year in five of eight midterm cycles since 1930 when the president’s party lost control of the House, according to Ned Davis Research.
Prediction markets had increasingly favored Democrats taking both chambers as election results came in. More than $1.48 billion had been wagered on the midterms.
The dollar weakened, with the euro and British pound both rising against it. The dollar index fell 0.32%.
Markets in Asia also declined. Japan’s Nikkei dropped 3%, South Korea’s KOSPI fell 1.6%, and a broad measure of Asia-Pacific shares excluding Japan was down 0.5%.
