Dow jumps over 1,000 points after US midterm election results, Tesla and SpaceX slide

President Donald Trump’s decision to accept the election results also helped ease concerns among investors about political uncertainty. The election results are expected to limit Trump’s ability to push through major policy decisions. However, his administration has introduced business-friendly tax cuts, its policies on tariffs and the war in Iran have raised concerns about inflation and economic stability. Democrats are now expected to act as a check on the president’s decisions.

At 9:01 am ET, Dow Jones Industrial Average was up 1,026.11 points, or 1.98%, at 52,812.83. S&P 500 gained 96.28 points, or 1.27%, to 7,665.20, Nasdaq Composite rose 339.95 points, or 1.34%, to 25,711.96.

Trump told The New York Times that he was “absolutely willing” to accept the election results. He also told The Wall Street Journal that he and other Republicans would work with Democrats. Jay Woods, chief market strategist at Freedom Capital Markets, said Trump’s initial response to the results played a part in the market’s recovery.

“The rebound “was in part due to the president’s initial tone and reaction to the results,” Woods told CNBC. “Still more uncertainty looms, but one thing is certain, there will be gridlock and historically this is good for the market.”

Political uncertainty and possible changes in Trump’s administration

The election outcome could also influence decisions within the Trump administration. Christopher Hodge, chief US economist at Natixis, New York, told Reuters that the political impact of the results could be significant, even if their direct effect on the economy remains limited.

“The wave looks to be underway; the questions are how high, how wide, and what will ​the fallout be. “Economically, we still don’t think the direct implications are huge. “That doesn’t mean that tonight won’t have big implications. For one thing, Trump doesn’t like bad news and seeing as how he personally selected many of the struggling candidates, he might ‌be looking to change the narrative sooner rather than later.

“A ‘short and intense’ campaign in Iran has been rumoured … and that would certainly be a distraction. “Presidents typically start making changes after midterms anyway and Trump could be looking for scapegoats. Secretary of Defense Hegseth comes to mind as a possibility. Bessent is another one to watch…he may be looking for a graceful exit if he views the administration as a sinking ship.”

Tesla, SpaceX and Trump Media shares fall

Shares of companies linked to Elon Musk and Donald Trump came under pressure as the election results emerged. At 9:39 am ET, Tesla shares were down 4.99% at $378.62, losing $19.88 during the trading session. SpaceX shares fell 4.28% to $135.26, a decline of $6.05. Trump Media & Technology Group shares dropped 11.18% to $5.28, losing $0.66.

The declines came as Democrats secured important victories in Texas. Democrat James Talarico defeated Republican Ken Paxton in the race for a US Senate seat, Democrat Gina Hinojosa defeated incumbent Governor Greg Abbott, who conceded on Tuesday night.

Elon Musk had spent more than $200 million supporting Paxton, according to the Texas Tribune. Musk had also campaigned for Paxton and criticised Talarico on his social media platform X in the final days of the election.

Why investors are positive about a divided government

Another reason behind Wednesday’s market rally was the expectation that a divided government could be good for stocks. Historically, markets have performed well when political power is shared between parties. Such power sharing makes it harder for any one party to introduce major policy changes, which can give businesses greater certainty.

Speaking to CNBC, Andrew Slimmon of Morgan Stanley Investment Management said markets generally prefer a divided government. “The markets “like gridlock — they don’t like a party with too much power,” Slimmon said. Slimmon also said the election outcome could increase pressure to resolve the conflict in the Middle East. A possible reduction in tensions could bring oil prices down.

“The combination of a large Democratic majority in Congress and President Trump’s statement that he is willing to work with the opposition should act as a break on extreme policy outcomes and bring down risk premia,” George Saravelos, global head of FX research at Deutsche Bank, said in a note shared with CNN.

The election results have given investors greater clarity about the political outlook, helping improve market sentiment. Expectations that the new Congress could limit excessive government borrowing and spending also supported US government bonds, pushing bond yields lower. The US dollar weakened against a basket of major currencies.

“Divided government has generally made it harder for fiscal stimulus to be passed,” Deutsche Bank analysts wrote in a note. “So that’s eased concerns on the fiscal trajectory a bit.”

AI data centre expansion faces fresh questions

Investors are also watching how the election results could affect the expansion of data centres across the US. These facilities are important for the growth of artificial intelligence (AI) because they provide the computing power needed to run AI services.

Although analysts had expected Democrats to perform well, the scale of their victory surprised some investors. The construction of AI data centres had become an important issue in several election campaigns. Concerns about their impact on local communities, particularly their heavy use of electricity and water, have led to calls for restrictions on new projects.

Democratic victories in states such as Texas have raised questions about whether local governments could introduce more restrictions or temporary bans on data centre construction. Such measures could slow down the expansion of the infrastructure supporting the AI industry.