The day after Democrats whupped up on Republicans in Tuesday’s elections and took over both houses of Congress,
the US stock market took off, seemingly happy about the change in power.
Stocks ripped higher on Wednesday as a decisive victory by Democrats in the U.S. midterm elections — and President Donald Trump’s acceptance of the results — removed political uncertainty risk hanging over Wall Street.
Democrats won majorities in both the House of Representatives and Senate, and scored victories in key gubernatorial races like Texas. The Democrats will now be a check on the policies of Trump, who’s enacted business-friendly tax cuts, while also pursuing tariffs and a war in Iran that’s boosted inflation.
The Dow Jones Industrial Average jumped 1,569.40 points, or 3.03%, to close at 53,356.12. The 30-stock index moved back above 53,000 for the first time since Sept. 8 and posted its best day since April 9, 2025, when Trump announced a pause on his so-called reciprocal tariffs. The S&P 500 gained 1.58% to end at 7,688.62, while the Nasdaq Composite jumped 1.44% to 25,736.51.
Stocks extended their gains after U.S. crude oil fell more than 8% as Vice President JD Vance blamed the Iran war for the election losses the Republican party suffered Tuesday. Brent futures traded more than 8% lower as well.
“There’s just going to be even more pressure to end the war,” said Peter Boockvar, chief investment officer at One Point BFG Wealth Partners. “The American people have obviously expressed their displeasure with inflation and the price of gasoline, amongst other things, and maybe this just pushes for an end to it. We’ll have to see.”
I don’t see a lot of actual economic reasons given for that big rally, do you? Just a lot of hopes for what the future may hold and assuming the results will work out.
Reality sunk back in today,
and all the “relief” from Wednesday went away. US stocks plunged on Thursday as AI and chip stocks sold off, erasing the gains from Wednesday's post-election rally.
The Dow Jones Industrial Average (^DJI) tumbled 3.4%, or more than 1,800 points. The S&P 500 (^GSPC) fell 4.3%, and the Nasdaq Composite (^IXIC) dropped 5.5%, with the tech-heavy index closing in correction territory.
The PHLX Semiconductor index (^SOX) plummeted more than 10% as Nvidia (NVDA), Micron (MU), and other chip names sank. Wall Street unloaded this year's AI winners, while large-cap tech stocks saw the worst day since the COVID-19 pandemic sell-off.
So you’re saying the AI Bubble is still running on empty after the election, just like it was before it?
Yeah, things are still not good in the real world. Same goes for the inflation situation. Sure, gas prices are down from where they were a couple of weeks ago, and the recent drop in oil prices likely means our national average will drop below $4 a gallon for the first time since July. But they’re still 33% above where it was a year ago, and well above any November price we’ve seen in the last 4 years.
Higher shipping and input costs are still working their way through the supply chain, given that
September had the largest increase in Producer Prices in 4 ½ years. Those higher prices will likely make their way to store shelves in October and November, while we find out on Friday if year-over-year hourly wage growth continues at 3%, or even goes below that awful level.
And this week, we got more evidence that costs kept going up at a rapid pace with the release of the
ISM manufacturing and the ISM services indexes.
For example, here’s what the report mentioned about prices for service firms.
“The Prices Index registered above 70 percent for the seventh time in eight months; the reading of 73 percent in October is 1 percentage point below September’s figure of 74 percent. The index has exceeded 60 percent for 23 straight months, and its 12-month average increased by 0.2 percentage point to 69.2 percent, the highest since April 2023.”
And here’s what
manufacturers were saying last month regarding their input costs.
The ISM® Prices Index registered 75.2 percent in October, 2.7 percentage points lower than the 77.9 percent reported in September; this reading also indicates that raw materials prices increased for the 25th straight month. Five of the six largest manufacturing industries — Machinery; Computer & Electronic Products; Chemical Products; Transportation Equipment; and Food, Beverage & Tobacco Products — reported price increases in October. “The Prices Index reading is still being driven by (1) increases in steel and aluminum prices that impact the entire value chain, (2) tariffs applied to many imported goods and (3) increases in petroleum-based products as a result of the Middle East conflict. Higher prices were reported by 53.1 percent of respondents in October, down 5.5 percentage points from September’s 58.6 percent,” says Spence. A Prices Index above 52.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials.
In October, the 16 industries that reported paying increased prices for raw materials, in order, are: Furniture & Related Products; Printing & Related Support Activities; Fabricated Metal Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Machinery; Paper Products; Textile Mills; Wood Products; Miscellaneous Manufacturing; Computer & Electronic Products; Primary Metals; Chemical Products; Plastics & Rubber Products; Transportation Equipment; and Food, Beverage & Tobacco Products. No industries reported paying decreased prices for raw materials in October.
Woof.
Sure, the production side of things kept moving along at a strong pace in October, and jobless claims remain below 200,000 a week. But the continued inflationary cycle and looming comedown from AI overproduction is a continuing cloud. With the stock market resuming its one-month slide on Thursday's plummet, it reflects the reality that this week's Democratic victory isn't going to immediate fix everything that got screwed up under Trump/GOP in the last 2 years.
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