US stocks jumped Wednesday after Democrats clinched a historic sweep of Congress on Tuesday, with the Dow Jones Industrial Average up more than 1,200 points, the S&P 500 rising 1.7% and the Nasdaq Composite up 2.1%.
Analysts believe that a gridlocked Washington â with Democrats now in control in the House and Senate and President Trump in the White House â could limit whiplash from sharp policy shifts that can create uncertainty on Wall Street, according to Reuters.
“Investors could conclude that Washington remains structurally constrained, limiting the prospects for dramatic shifts in the âeconomic outlook,” Michael Krautzberger, an analyst at Allianz Global Investors, told the outlet.
Markets tend to prefer a divided government because less sweeping policy changes wonât upend the economy.
âThe magnitude of the gains for the Democrats in the midterms does not change too much for the near-term policy outlook, given the party still lacks a filibuster-proof majority in the Senate and President Trump has veto power to block legislation,â Stephen Brown of Capital Economics told the Associated Press.
Oil prices fell after the results with investors optimistic that Trump might rein in his foreign policy decisions after the election. Brent crude was down 0.7% to $102.87 and WTI dropped 0.2% to $94.97 a barrel.
Investors are sifting through a slew of ballot proposals and candidateâs policy platform trying to get a clearer picture of how things might shake out politically over the next two years.
Data center concerns were a big topic among candidates in states like Texas and Georgia, and political pressure has made investors nervous, sources told Reuters.
Futures tied to the tech-heavy Nasdaq fell as much as 2.4% as election results rolled in, but rebounded by about 1% in the morning.
“Uncertainty is likely to persist in the short term, whilst negotiations between the tech giants and the new local âauthorities lead to potential agreements,” âNabil Milali, a â portfolio manager at Edmond de Rothschild Asset Management, told Reuters.
Global markets suffered a blow in Japan; their tech-centered market the Nikkei 225 dropped as much as 4.8%, and shares of the Taiwan Semiconductor Manufacturing Company fell 1.5%, according to the New York Times.
