Dow Futures Surge After Democrats Win Congress—What Investors Should Know

The historic Democratic Blue Wave that swept across the country during Tuesday night’s midterm elections also brought a rising tide to the stock markets, at least for now.

Dow futures soared more than 800 points early Wednesday, while Nasdaq futures rebounded following an initial selloff.

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Here’s a look at what’s driving the early rally and what investors should know.

Big Dem Win, Big Wall Street Gains

Democrats notched massive electoral wins across the board Tuesday, grabbing control of both the U.S. House and Senate and winning key governorships.

They ended the night with 54 Senate seats to establish a clear majority in that chamber, The New York Times reported. Dems also flipped the House in their favor with at least 228 seats. Included in those wins were stunning victories in Republican strongholds like Texas, South Carolina and Kansas.

At the state level, Democrats scored big gubernatorial wins in Texas, Georgia and Iowa.

Ahead of Wednesday’s stock market open, futures tied to the Dow Jones Industrial Average rallied as much as 803 points, or 1.5%, CNBC reported. S&P 500 futures climbed 1% while Nasdaq-100 futures gained 0.5%.

An Unexpected Rally

Many market experts feared that a big Tuesday night for Democrats would lead to a tough Wednesday for Wall Street, mainly due to the prospect of a Dem-controlled Congress enacting tougher regulations and fewer corporate tax breaks.

In fact, the markets initially sank as the Tuesday night election results started rolling in.

The tech-heavy Nasdaq fell as much as 2.4%, the Wall Street Journal reported, amid worries that Democrats would rein in heavy investments in AI. But then investors “reassessed their initial knee-jerk reaction.”

Much of it had to do with the reaction of President Donald Trump, who has spent weeks campaigning hard for his fellow Republican candidates and lashing out against Democrats.

After it was clear Democrats would have a resounding victory, Trump surprised many by telling The New York Times he was “absolutely willing” to accept the results. He also told the Wall Street Journal that he and Republicans would work with Democrats.

Those comments seemed to calm Wall Street’s nerves.

“Still more uncertainty looms, but one thing is certain, there will be gridlock and historically this is good for the market,” Jay Woods, chief market strategist at Freedom Capital Markets, told CNBC.

Walmart Among Early Gainers

As CNBC noted, shares “linked to the economy” could benefit from the election results, with both Walmart and Bank of America rising around 2% before Wednesdays open.

Others who could benefit from Democratic policies include health insurance and healthcare stocks. Among the pre-market gainers were United Health, Molina Healthcare, Centene and HCA Healthcare.

Solar energy stocks also got a boost, with the Invesco Solar ETF rising 5% pre-market.

Editor’s note on political coverage: MoneyLion is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories.

This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice. 

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