Dow leaps 3.03% points as oil falls over 8% after Democrats win Congress

The Dow Jones Industrial Average jumped 1,569.40 points, or 3.03%, to 53,356.12 on Wednesday, its best day since April 2025, after Democrats won control of the House and the Senate.

Oil fell more than 8%. The S&P 500 rose 1.58% to 7,688.62. The Nasdaq composite rose 1.44% to 25,736.51, held back by losses in chip and data-center stocks.

The Dow Jones Industrial Average rose 1,569 points, or 3.0%, to 53,356 on Wednesday, and U.S. crude fell 8.3%, after Democrats won both the House and the Senate. The S&P 500 rose 1.6%, and the Nasdaq Composite rose 1.4%. The Associated Press reported the majorities.

The Wall Street Journal said investors took those wins as a sign the war with Iran might end sooner rather than later, and that crude fell sharply on that reading. Bloomberg said the Democratic win, which highlighted opposition to the Iran war, extended this week's plunge in oil prices and helped drive stocks and bonds higher.

Vice President JD Vance wrote that "the reason we lost is the war. The president himself said so last night," Politico reported.

Trump did not back away from the war. He told The Wall Street Journal that the war played a part in his party’s losses but said he did not regret it. He also said he would work with Democrats and would keep his veto. Neil Shearing of Capital Economics said new U.S. strikes on Iran could push Brent above $120 a barrel, Dow Jones Newswires reported.

December West Texas Intermediate crude, the U.S. benchmark, settled at $88.12 a barrel on the New York Mercantile Exchange, down $7.97, or 8.3%. January Brent, the international benchmark, settled at $94.62, down $8.98, or 8.7%, its lowest settlement since Aug. 31. Brent has fallen 19.6% in three sessions, its steepest three-day drop since April 2020, MarketWatch reported. United States Oil Fund LP USO (USO), which holds WTI futures, fell 8.1%.

Crude had already fallen hard before the vote. On Monday it dropped 7.4%, to $96.46, after President Donald Trump said Iran wants to "make a deal and that could happen," CNBC reported. Iran's president, Masoud Pezeshkian, said Tehran was seeking a solution through dialogue. CNBC said the market had priced in the risk of a military escalation after the election, and that crude had gained more than 10% in October.

Oil price drop ramifications

A Dow Jones Newswires report said the Democratic win is seen as increasing the chances of an end to the Iran war. Derivatives markets were pricing inflation one year from now at around 2.1%, the report said, down from 2.4% on Tuesday and 2.7% at the end of last week.

State Street Energy Select Sector SPDR ETF XLE fell 4.7%, a third straight decline. ExxonMobil, its largest holding, fell 4.5%. The Associated Press said the drop in crude hurt the big oil companies that had been rallying for much of the year after the war began.

State Street Consumer Discretionary Select Sector SPDR ETF XLY rose 4.2%. Amazon, 21% of the fund, rose 6.1%. Tesla, the second-largest holding, fell 3.3%.

Treasury bonds up, yields down on news of divided government

The 10-year Treasury yield fell to 4.88% from 4.95% late Tuesday. The Associated Press said cheaper oil eased inflation worries, and that investors may also expect a divided government to spend less, adding less debt.

** Defense stocks fall

Lockheed Martin dropped 6.9%, Northrop Grumman 4.5% and General Dynamics 2.6%. The AP said a Democratic Congress could push Trump to pull back from the war, and Reuters said his $1.5 trillion defense budget request now faces a tougher road. Defense stocks led the Industrials sector down 1.1% for the day.

Why the Dow beat the Nasdaq

Technology stocks split in two directions.

Apple rose 5.3% and Microsoft rose 6.7%, with both Dow components hitting record highs. But Nvidia, the largest holding in State Street Technology Select Sector SPDR ETF ('XLK), fell 3.2%. Chip and data center stocks fell as well, which CNBC analysts attributed to fears that Democrats would impose new limits on data centers.

Those fears grew after Democrat Gina Hinojosa won the Texas governor’s race; she has pledged an immediate moratorium on data centers in the state. CNBC also said Apple could gain if slower data-center construction eases memory-chip prices, which have squeezed its margins.

Chinese AI Stocks lead Shanghai, Shenzhen Composite indexes higher

The upshot: XLK finished flat for the day, while Chinese stocks, represented by the Shanghai Composite Index, climbed 2.16% on the election news. The more tech-heavy Shenzhen Composite rose 3.7%. The China AI ETF, AICH, which invests in Chinese AI firms, rose 8.73% on news of the Democrats' electoral success.

Meanwhile, the State Street SPDR Dow Jones Industrial Average ETF Trust DIA rose 3.1%. Financial companies are 27% of the Dow, while technology stocks make up 19%.

State Street Financial Select Sector SPDR ETF XLF rose 3.5%.

The State Street SPDR S&P 500 ETF SPY rose 1.7%. Technology is 39% of that fund, against 19% in DIA. Invesco QQQ Trust, Series 1 QQQ, which tracks the Nasdaq-100, rose 1.0%.

Since the Oct. 28 market close, USO is down 12.7%, reflecting a significant drop in oil prices. DIA is up 1.6%. XLK is down 7.6%, and QQQ is down 4.6%.