Democrats sweep Congress; Dow posts best day since April

Democrats sweep Congress; Dow posts best day since April
US Stocks Morning Brief | Thursday, 5 November 2026 (Hong Kong time; cash market close is Wednesday, 4 November, US Eastern time; regular US trading runs from 22:30 Hong Kong time to 05:00 the next day)

On Wednesday, the Dow rose 3.03% to 53356.12 points, the S&P 500 gained 1.58% to 7688.62 points, the Nasdaq rose 1.44% to 25736.51 points, and the equal-weight S&P ETF (RSP) gained 1.86% to $223.33 (Reuters, republished) (Finnhub). The 10-year US Treasury yield was about 4.92%, down roughly 3 basis points from the previous day; WTI crude was about $88 per barrel, down about 8%; gold was about $4060 per ounce, up about 3.5% and back above $4000; and the dollar index was about 101.4, its lowest since 30 September (Dow Jones, republished) (Reuters, republished).

Market theme
Wednesday's market was a “certainty” trade: Nasdaq futures fell more than 2% at one point overnight, but once news of the Democrats' sweep of both chambers and Trump's acceptance of the result was settled, futures turned positive across the board. The Dow posted its best day since 9 April 2025: the market first traded on “divided government and checks and balances make radical legislation harder to pass,” rather than on either party's policies themselves. Reuters reported that the Democrats' capture of both chambers was a major setback for President Trump, driven mainly by voter dissatisfaction with the Iran war, the cost of living and tariff policy. Terry Sandven, chief equity strategist at U.S. Bank Wealth Management, said the election result brought a degree of gridlock, which often benefits stock prices (Reuters, republished). The other force behind the reversal, however, was oil rather than politics: markets bet the shift in power would hasten an end to the Iran war, oil fell about 8% in a day, and expectations of inflation pressure eased, allowing stocks, bonds and gold to rise together. Friday's nonfarm payrolls will test whether the “oil relief plus divided government suppressing yields” thesis holds up.

I. Markets and data: From steep overnight losses to broad gains, with breadth far better than Tuesday

• The scale of the reversal was informative in itself: a Reuters column said Nasdaq futures fell as much as 2.5% after news of a “clean sweep” by the Democrats, yet the Nasdaq closed up nearly 1.5%, while the Dow posted its best day since April last year (Reuters, republished). Reuters also reported that 9 S&P 500 sectors rose and only 2 fell; 5 sectors gained 3% or more, with consumer discretionary up 4.3% and energy down 4.8% (Reuters, republished). Tuesday's narrow rebound had “4 sectors up and 7 down”; Wednesday's broad rebound had “9 sectors up.” The equal-weight S&P gained 1.86%, outperforming the weighted index, showing that large-cap stocks were not the only support for the index.
• Employment and services data did not steal the election's spotlight, but neither did they hinder markets: ADP data showed US private payrolls increased by 86 thousand in October, above expectations, while the September figure was revised down from 90 thousand to 86 thousand (data compilation). Reuters said the ISM services PMI slipped from 54.9 in September to 54.5 in October, below the expected 54.8; new orders fell from 59.8 to 55.9, input prices fell from 74.0 to 73.0 but remained high, and services employment rose from 50.1 to 51.4 (Reuters, republished). The data say “expansion continues, momentum has eased slightly, and prices remain hot.” That left room for bonds to rise as divided government restrained supply, without pushing markets to bet on an immediate Federal Reserve pivot; neither side was extreme.
• The Treasury refunding plan did not unsettle the bond market: the US Treasury announced a 125 billion-dollar refunding this quarter to repay approximately 97 billion dollars of maturing debt, comprising 58 billion dollars of 3-year notes, 42 billion dollars of 10-year notes and 25 billion dollars of 30-year bonds. It also expects to keep auction sizes for nominal coupon-bearing and floating-rate securities unchanged over the next several quarters (US Treasury). Dow Jones Newswires said the Treasury planned to keep longer-term borrowing sizes unchanged in coming months (Dow Jones, republished). Unchanged supply was itself a positive: on a day when expectations of divided government had already lowered long-term yields, the Treasury added no supply pressure, allowing bonds to hold their gains.
• Overseas markets also strengthened, with Europe's gains likewise driven by politics: a Reuters column said European stocks rose 1.8% on Wednesday, the UK gained 1%, China rose 2.3%, Japan fell 1.5%, and Brazil gained 1%, ending a six-day losing streak (Reuters, republished). Reuters also said the US trade deficit narrowed slightly in September, while imports reached a record high (Reuters, republished). Europe and the US rose together, but different areas led their gains, suggesting global markets were trading the shared theme of “less US political uncertainty,” rather than one country's earnings.

II. Bonds, the dollar and commodities: Yields retreat, dollar weakens, oil plunges and gold surges

• Bonds were Wednesday's clearest beneficiary: Dow Jones Newswires said the 10-year Treasury yield fell as low as 4.906% before recovering to about 4.93% intraday, while the 2-year yield fell to a two-month low of 4.546% (Dow Jones, republished). A Reuters column said US yields fell 3 to 7 basis points across the curve, with the 10-year yield at its lowest since July (Reuters, republished). Long-term yields fell, and short-term yields also fell but by less, suggesting the market was betting that divided government would restrain fiscal expansion and reduce supply, rather than that the Fed would cut rates. The two should not be conflated; Friday's payrolls are the test of the latter.
• Oil's plunge was the day's biggest macro variable: Reuters said the sharp fall came as markets bet the shift in power would hasten the end of the Iran war, with Brent and WTI each down about 8% (Reuters, republished). A Reuters column said Brent had fallen nearly 20% and WTI 15% so far this week, putting them on track for their biggest weekly declines since April 2020 (Reuters, republished). Oil fell 8% because the “war premium” was being unwound, not because demand had collapsed. But the faster that premium clears, the more it shows how much it was previously overestimated; if negotiations suffer setbacks, oil's rebound could be equally sharp.
• Gold and the dollar reflected the other side of the same trade: a Reuters column said gold rose 3.5% and returned above $4000 per ounce, posting its best day since 19 August; the dollar fell to its lowest since 30 September, while emerging-market currencies rebounded, led by the Mexican and Chilean pesos (Reuters, republished). Gold rose, the dollar fell and stock indexes rose at the same time, indicating this was not a flight to safety: a weak dollar gave gold a reason to rise without panic, while falling oil gave stocks and bonds a reason to rise without rate cuts.

III. Stock and sector moves, including earnings: Mega-caps lead, energy and defense lag, CVS plunges against the market on split

• Mega-caps led Wednesday's gains, with Apple setting an intraday record: Reuters said Microsoft rose 6.7%, Amazon 6.1%, Alphabet 3.2% and Meta 1.4% (Reuters, republished). Apple closed up 5.31% at $349.51, after reaching a record intraday high of $354.50 (Finnhub). Microsoft and Amazon gained the most, reflecting not “AI demand is back” but “a data-center construction slowdown benefits the mega-caps with the most abundant cash flow”: the capital spending saved by a slowdown was first factored into their free cash flow.
• Consumer and financial stocks joined in, evidence of improving breadth: McDonald's closed up 6.53% at $280.22, while Walmart rose 3.45% to $129.17 (Finnhub) (Finnhub). Uber closed up 4.91% at $69.87, after disappointing fourth-quarter guidance weighed on it the previous day (Finnhub). Even stocks such as McDonald's, with falling US same-store sales, and Uber, with disappointing guidance, could rise around 5% on Wednesday. This suggests the day's advance was a beta-driven move powered by “less political uncertainty plus falling oil,” rather than an earnings-driven stock-specific market; differences in individual fundamentals were temporarily submerged.
• The laggards were those most closely tied to the old policies: Reuters said Elon Musk's SpaceX fell 3.9% and Tesla fell 3.3%; Musk had committed nearly 500 million dollars to Republican candidates. Defense stocks Northrop Grumman, RTX and Lockheed Martin fell because Trump's 1.5 trillion-dollar defense budget request would face a harder path in Congress, while a solar ETF rose nearly 6% (Reuters, republished). Clean energy and healthcare, “held back longest by the old policies,” rose, while names “most closely tied to the old policies” fell. Money rotated on the basis of “restraints being lifted,” rather than selecting stocks for “new positive catalysts.”
• CVS was the day's biggest stock to fall against the market: Reuters said CVS announced it would split into two listed companies, separating about 9000 retail pharmacies from its Aetna insurance and Caremark pharmacy benefit management businesses. The split is planned for completion in the first half of 2028. Its shares plunged 12.6% to $79.94, although third-quarter adjusted earnings per share of $2.09 were well above the expected $1.65 (Reuters, republished). Earnings beat expectations and guidance was raised, yet the stock fell more than 12%. The market was penalizing execution risk in the split rather than performance: until the allocation of debt, cash flow and shared costs is clear, the split is a “show me first” proposition.
• Qualcomm and Arm both “beat expectations but fell” after hours, with guidance still the key variable: Dow Jones Newswires said Qualcomm's fiscal fourth-quarter adjusted earnings per share of $2.17 and revenue of 10.32 billion dollars both beat expectations, but handset chip revenue fell 26% year on year to 5.14 billion dollars, while automotive revenue rose 89% to 1.99 billion dollars. Shares fell 4.9% after hours to $164.78; fiscal first-quarter guidance was for revenue of 10.4 billion to 11.2 billion dollars and adjusted earnings per share of $2.15 to $2.35 (Dow Jones, republished). Arm's fiscal second-quarter adjusted earnings per share of $0.52 exceeded the expected $0.47, and revenue of 1.44 billion dollars exceeded the expected 1.38 billion dollars, but third-quarter guidance was broadly in line with expectations and shares fell about 5% after hours (Seeking Alpha). Qualcomm and Arm tell the same story: beating expectations for the current quarter is no longer enough; the market wants the next quarter to far exceed expectations. Weak handset demand and rising memory costs remain headwinds at the end-device end of the AI chain.

IV. AI highlights: A major split within the AI trade as mega-caps rise and the construction chain falls

• Divergence was Wednesday's main AI trading theme: Reuters said cash-rich AI mega-caps rose while chipmakers and data-center operators fell, against a backdrop of Democratic gains in key data-center states including Texas and Georgia, where public opposition to rapid data-center expansion is growing (Reuters, republished). Reuters also said the Philadelphia Semiconductor Index fell 3.1% to a six-month low; data-center operators Hut 8 fell 23%, IREN 11%, Core Scientific 10% and Applied Digital 6.7% (Reuters, republished). Slower construction means “saving money” for mega-caps but “lost orders” for the construction chain. The same news produced opposite calculations at the two ends of the AI chain, explaining why the Nasdaq's gain of 1.44% was markedly smaller than the Dow's 3.03% on Wednesday.
• Citi's assessment identified the mechanism behind the divergence: Reuters quoted Scott Chronert, Citi's head of US equity strategy, as saying that if the pace of data-center construction is delayed or altered, the fundamental trajectory for many suppliers will change (Reuters, republished). AMD rose only 1% after forecasting faster-than-expected growth in 2027 and surging data-center sales (Reuters, republished). AMD rose 7.6% after hours the previous day but only 1% on Wednesday, suggesting that concern over a possible construction slowdown had offset most of the benefit from “faster growth in 2027.” The logic driving AI-stock volatility is shifting from “is there demand?” to “can construction be delivered on schedule?”

V. Forward calendar (Hong Kong time)

• 5 November (Thursday), 20:00: Bank of England rate decision; markets expect its first rate increase in more than three years. 21:30: US initial jobless claims for the prior week and third-quarter productivity; Fed officials Hammack and Barkin speak. After hours (early 6 November Hong Kong time): Airbnb, Cloudflare and Atlassian report earnings (Reuters, republished).
• 6 November (Friday), 21:30: US October nonfarm payrolls report (Bureau of Labor Statistics). A Reuters poll forecasts an increase of 65 thousand jobs, following an increase of 29 thousand in September; unemployment is expected to hold at 4.2%. This is the week's key economic release (Reuters, republished).
• Note: The US has moved to standard time; regular US stock trading runs from 22:30 Hong Kong time to 05:00 the next day. WTI, gold and dollar-index levels in this edition are approximate: republished reports differ slightly, ranging from $87.7 to $88.5, around $4060, and from 101.3 to 101.5, respectively. The Reuters column's intraday moves are used as the reference: oil down about 8%, gold up about 3.5%, and the dollar at its lowest since 30 September.