US stocks surged after Democrats won both houses of Congress, with the Dow posting its biggest post-midterm gain since 1982. Companies tied to the broader economy rallied, while AI and chip stocks fell.
The Dow Jones Industrial Average rose 1,569.40 points, or 3.03%, on Wednesday to close at 53,356.12, its best day since April 2025 and its fifth-largest one-day point gain ever.
It was also the Dow’s biggest single-day gain after a midterm election since 1982, according to CFRA Research. The S&P 500 rose 1.58% to 7,688.62, its best day in three months, and the Nasdaq Composite gained 1.44% to 25,736.51.
The rally was broad. Gainers outnumbered decliners by about three to one, and the equal-weight S&P 500, which gives every company the same weight, rose 1.86%, more than the regular index. The small-company Russell 2000 gained 1.58%.
Consumer discretionary stocks led, rising 4.3%. Energy was the worst sector, falling 4.8%, as oil prices collapsed.
Markets welcomed the result
Investors typically like divided government, in which one party controls the White House and the other controls Congress. It tends to limit large policy changes, which reduces uncertainty for businesses. With Democrats now holding both houses, sweeping new tariff, tax or spending measures from the administration become harder to pass. Reports noted that President Trump said he would accept the results and work with the opposition, which eased concerns about political turmoil.
The biggest factor for markets, though, was oil. Brent crude fell almost 9% to below $95 a barrel, as traders bet that a Democratic Congress makes renewed US strikes on Iran less likely and a settlement more likely. Vice President JD Vance attributed Republican losses to the Iran war. Lower oil reduces inflation risk, which in turn makes it easier for the Fed to avoid raising interest rates in December.
Companies tied to the wider economy benefited most. Walmart rose 3% and Bank of America about 4%. Among large technology companies, Microsoft rose 7%, Amazon 6% and Apple 5%, closing at a record high.
The AI split
Not every technology stock rose. Nvidia fell 3%, CoreWeave about 10% and Nebius 6.7%. Tesla fell 3.3%.
Reports said data centre and AI infrastructure stocks fell on concerns that a Democratic Congress could bring tighter regulation of AI or put pressure on the very large spending by technology companies on AI infrastructure. Investors appeared to bet that the big technology companies would spend less on AI, which helps their cash flow but hurts the chipmakers and data centre operators that receive that spending. That explains why Microsoft and Amazon rose while Nvidia and CoreWeave fell on the same day.
This reverses the pattern of recent weeks, when concerns about heavy AI spending hurt the big technology companies themselves.
The India connection
The US rally is likely to bump up Indian markets on Thursday, after the Sensex and Nifty rose for five straight sessions. GIFT Nifty quotes pointed to a higher opening.
The more important effect for India is oil. Brent falling below $95, from near $118 last Friday, is a major relief for India’s import bill, the rupee and inflation. Foreign investors bought Indian shares for a third straight day on Wednesday.
There is one caution for Indian IT. The rally in US stocks was led by companies outside technology infrastructure, and the AI spending debate continues to weigh on technology outsourcing. Indian IT stocks fell on Wednesday even as the broader market rose. A US rally driven by banks, retailers and consumer companies may do little to help Indian IT.
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