U.S. stock futures dropped after Democrats secured major midterm victories, with projections indicating the party would take control of both chambers of Congress.
Futures for the S&P 500 fell 1.3%, while Nasdaq-100 futures slid 2.2%. Dow futures were down 0.8%.
The election outcome added to uncertainty among investors, who are weighing how a change in congressional control could affect taxes, federal spending and regulation across industries including technology, defense, health care, banking and cryptocurrency.
Some investors appear to be anticipating a stronger Democratic showing than expected, which could dampen hopes for additional fiscal stimulus, said Charu Chanana, chief investment strategist at Saxo. She also noted that concerns about tighter oversight of artificial intelligence and major technology companies could weigh on stocks, especially as investors scrutinize high valuations and AI spending.
Still, the early market decline may not last. Lower Treasury yields could offer some support, Chanana said. The 10-year Treasury yield fell six basis points to 4.906%.
Past midterm elections suggest that a change in congressional control does not necessarily derail the stock market. The S&P 500 rose through the end of the year in five of eight midterm cycles since 1930 in which the president’s party lost control of the House, according to Ned Davis Research.
Prediction markets had increasingly favored Democratic control of both chambers as election results came in. More than $1.48 billion had been wagered on the races.
The dollar weakened, with the euro and British pound gaining ground. The dollar index fell 0.32%.
Markets in Asia also declined. Japan’s Nikkei lost 3%, South Korea’s KOSPI fell 1.6%, and a broad index of Asia-Pacific shares excluding Japan dropped 0.5%.
