Stock futures sank on a projected Democratic Congress, then recovered

S&P 500 futures were up 1.2% before Wednesday's open, after falling as much as 1.4% overnight. Reuters said markets initially declined on the news about the results. Dow Jones reported they reversed as the scale of the Democratic victory became clear.

House, Senate and stock futures

As of 6:54 a.m. ET, S&P 500 futures were at 7,686.75, up 1.2% from Tuesday's settlement. Nasdaq-100 futures were up 1.0%, and Dow futures were up 1.6%.

The drop hit the Nasdaq hardest. Nasdaq-100 futures fell as much as 2.4% from Tuesday's settlement before that rebound.

NBC News projects Democrats will control the House, estimating 258 seats to 177 for Republicans, and the Senate, with 54 Democratic seats to 44 for Republicans. Two Senate races were still uncalled.

Joachim Klement, a strategist at Panmure Liberum, told The Wall Street Journal the worry was a slower buildout of artificial intelligence. "The worry really is Democrats winning could slow the data-center build-out and AI growth," he said.

Nannette Hechler-Fayd'herbe, head of investment strategy at Lombard Odier, told Dow Jones the first move was a knee-jerk response to a surprise. The gains, she said, reflected a balance of power between Congress and the president that would keep both parties in check.

"We are in the best possible outcome for markets," she said.

"The blue wave means the federal government is sure to be divided on most issues," said Deborah Cunningham, chief investment officer for global liquidity markets at Federated Hermes.

"That typically creates a blockade against new legislation," she said.

President Donald Trump posted an image of a cap reading "VETO." A Democratic Congress can pass a bill. He can reject it.

He told the New York Times, "I am absolutely willing to accept those results."

Data-center stocks fall as solar rises

Data-center operators were lower before the open, and solar shares were higher. Reuters reported Core Scientific down 2.8% and Iren down 1.4%. First Solar was up 9.4%, and Sunrun was up 10%.

Reuters said the results raised the prospect of tougher oversight of the artificial intelligence boom, and of fresh backing for renewables. Democrats who campaigned in part on a moratorium on data-center development won the governor's races in Texas and Georgia, Reuters reported.

Analysts doubt any law could meaningfully stall construction, Reuters said, even if a Democratic Congress means more hearings. Hearings are what that Congress can do on its own. A law that stops a project still has to get past the president.

Advanced Micro Devices, which sells those centers their chips, said after Tuesday's close that data-center revenue rose 97% from a year earlier. It guided fourth-quarter revenue to about $17 billion, above the $16.2 billion analysts expected, CNBC reported.

Bond yields fall and gold rises

Bond prices were higher even as stock futures recovered. A lower yield is a higher price. Reuters reported the 10-year Treasury yield at 4.92% on Wednesday morning, down 3 basis points from Tuesday, after a drop of as much as 6 basis points to 4.89%.

"Bonds are coming out as the clear winner as markets put the AI trade on the chopping block and embrace the higher possibility that further tax cuts are put on ice and government spending slows," said Prashant Newnaha, senior rates strategist at TD Securities in Singapore.

Gold futures were at $4,050.90 as of 6:54 a.m. ET, up 2.8% from Tuesday's settlement. Futures on the U.S. dollar index were down 0.5% from Tuesday's settle as of 6:50 a.m. ET. The Wall Street Journal said gold climbed on a softer dollar and falling Treasury yields after Democrats won control of Congress.