Markets

U.S. equities finished sharply higher Wednesday, recovering from an overnight sell-off to post the best session since early August as participants digested the Democratic sweep of the House and Senate. The broad risk-on impulse was clear in the tape, with the Dow Jones leading the major indices with a 3.0% gain, while the S&P 500 added 1.6% and the Nasdaq rose 1.4%. The move was a decisive rotation into risk assets—value outperformed growth substantially (+2.6% vs. +0.4%), dividend and quality factors were strong, and the VIX collapsed 19.6%. Breadth was broad but selective, with Consumer Discretionary (+4.3%) the best-performing sector on the view that Democratic victories, following a campaign focused on affordability, would support consumer-facing names. Homebuilders were notably strong at +5.4%.

The most significant sector divergence centered on the AI infrastructure complex. While mega-cap technology led the advance, Technology as a whole finished flat (-0.0%), and the AI trade was decidedly weaker amid post-election debate about impacts for the datacenter buildout. Microsoft gained 6.7%, Amazon rose 6.1%, Apple advanced 5.3%, Alphabet climbed 3.2%, and Meta added 1.4% on the reasoning that a Democrat-controlled Congress, along with Republican defeats in state races including Texas and Ohio, could slow data center development—preserving the competitive position of the largest companies and improving free cash flow as investment spending moderates. That divergence is also visible in the worst-performing sectors: Energy fell 4.7% as WTI crude declined 7.9%, and Industrials dropped 1.1%. Financials (+3.5%), Communication (+3.5%), Consumer Staples (+3.4%), and Real Estate (+3.3%) were all solidly higher.

Treasury yields fell across the curve, closing at their lowest levels since early September, with the 10-year down 5.8 bp to 4.894% and the 30-year off 4.2 bp to 5.282%. The 5-year slipped 5.4 bp to 4.689%, while the 13-week was flat at 4.025%. Crude's 8% decline—after Vice President JD Vance blamed the Iran war for Republican losses—combined with falling yields supported the broader risk-on tone. Economic data offered a steady backdrop: continued but slower growth in the services sector, solid ADP employment growth for October, and a slight narrowing of the trade deficit. The day's movers skewed toward the consumer and momentum theme, with KD +30.1%, DUOL +26.0%, and YOU +23.7% among the top gainers, while FIS -23.7%, HUT -23.2%, and STRL -21.5% led the downside. Friday's Employment Situation report will be the next test of whether the rally can extend.