'Markets like gridlock': U.S. stocks open higher after Democratic midterm sweep

Major U.S. stock indexes rose in early trading on Wednesday. The Dow Jones Industrial Average, a blue-chip index that tracks 30 major U.S. companies, led the gains, rising 1.9%. The broad-market S&P 500 gained 1.2%, and the Nasdaq Composite advanced 1.4%.

Among the biggest gainers were stocks that could benefit from a more stable economy. Walmart added 2%, and BofA more than 3%. Shares of companies that stand to benefit from Democratic policies or an easing of Trump administration measures also climbed. Health insurers and hospital operators were among the gainers, with Molina Healthcare advancing around 6%, Centene 6.5%, and HCA Healthcare 7%. The Invesco Solar ETF, which invests in solar energy stocks, jumped 5%.

Shares of Oracle, SpaceX, and CoreWeave fell.

The Democrats’ decisive victory, along with President Donald Trump’s acceptance of the results, has eased political uncertainty that had weighed on Wall Street, CNBC reported. Democrats won majorities in both the House of Representatives and the Senate, as well as key gubernatorial races, including in Texas. They will now be able to check the policies of Trump, who enacted business-friendly tax cuts while imposing tariffs and waging a war with Iran that has fueled inflation. Trump told the New York Times he was “absolutely willing” to accept the election results.

Stocks have historically performed well under divided government, CNBC noted. With less scope for any one party to push through its policies or change regulations, businesses face a more predictable environment.

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

Markets “like gridlock – they don’t like a party with too much power,” Andrew Slimmon of Morgan Stanley Investment Management said on CNBC’s “Squawk Box Europe.” He added that if the election results strengthen the push to resolve the conflict in the Middle East, oil prices could fall. “That’s been an issue for the Fed, and inflation, and part of the reason that rates are higher.” Brent and WTI crude prices were down 3% on Wednesday.

The Democratic victory raises several important questions for investors, UBS Chief Economist Paul Donovan reckons. “Fiscal gridlock seems more likely, which has supported U.S. government bonds,” Seeking Alpha quoted him as saying. The yield on the 10-year Treasury fell to 4.942%.

Donovan added that state election results also matter to investors because decisions about data center construction are often made at the state level, and some Democratic governors have publicly opposed such projects. “At the very least, data center builders are likely to have to offer more incentives to local communities.”