US stocks today: Dow rallies 1,500 pts, S&P, Nasdaq over 1% as Democrats win midterm elections

Wall Street staged a sharp rally on Wednesday as Democrats took control of Congress, easing concerns over political uncertainty and lifting investor sentiment. However, the election outcome triggered a selloff in data centre stocks as investors braced for tighter scrutiny of the fast-growing AI infrastructure industry, Reuters reported.

The Dow Jones Industrial Average jumped 1,575 points, or 3.04%, to close at 53,362.57. The S&P 500 gained 1.58% to 7,688.73, while the Nasdaq Composite advanced 1.44% to 25,736.51.

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Democrats secured control of both the Senate and the House of Representatives, marking a significant setback for Republicans in traditionally strong constituencies. The prospect of a divided Washington raised expectations of policy gridlock, which investors viewed as potentially favourable for equities.

"Stocks are sharply higher today as election clarity reduces uncertainty," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management.

Also Read: Democrats’ Senate win could shield Federal Reserve from Trump’s influence, but risks persist

AI trade splits as data centre stocks face pressure

The election rally came with a sharp divergence across the technology sector. Large, cash-rich technology companies gained ground, while data centre operators and suppliers tumbled as investors assessed the possibility of tighter restrictions on AI infrastructure expansion.

Amazon, Meta Platforms and Alphabet rose, while data centre operators IREN and Hut 8 dropped sharply. Applied Digital and Core Scientific also fell. The Philadelphia SE Semiconductor index hit a six-month low.

The concerns were particularly significant for companies whose growth depended on continued heavy investment in data centres. A slower expansion could ease spending pressures on technology giants but threaten the revenue prospects of infrastructure suppliers.

"It's pretty clear that the AI trade will face some headwinds there ... If you push out the pace or change the pace of the data center buildout, you begin to change the fundamental trajectory for many of those suppliers," said Scott Chronert, head of US equity strategy at Citi Research, according to Reuters.

AMD also fell despite forecasting faster-than-expected growth in 2027, supported by strong data centre sales.

Falling oil prices add to market optimism

A sharp decline in oil prices provided another boost to equities, with investors betting that the Democratic victory could accelerate efforts to end the Iran war, Reuters reported.

Most S&P 500 sector indexes finished higher, led by consumer discretionary stocks, while energy shares declined.

Solar and clean energy stocks also advanced on expectations that a Democratic-controlled Congress could help preserve federal support for clean energy development. In contrast, defence stocks Northrop Grumman, RTX and Lockheed Martin fell as Trump's proposed $1.5 trillion defence budget faced a potentially tougher path through Congress.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)