Democrats win Congress; Nasdaq futures swing from a 2.4% drop back to flat as ADP, ISM and Treasury refunding loom

Explain terms

The one thing that matters today

Democrats won majorities in both the US Senate and the House in Tuesday's midterm elections, according to Reuters. As of 12:30 AM CT, AP race calls showed Democrats had flipped 7 Senate seats and 16 House seats from Republicans. The first market reaction was sharp: Nasdaq 100 futures fell as much as 2.4% and S&P 500 futures as much as 1.4% before recovering, per Reuters. Our Breaking Brief has the overnight details.

The market is treating this less as a vote on the White House and more as a vote on the AI build-out: data-center spending, power prices and tech oversight. The quick rebound suggests a lot of this was already expected; the question for today is whether the 8:30 AM CT cash open confirms that calm or brings the selling back.

"The significance of these midterm elections is more like a referendum on AI than a referendum on Trump."^{Aidan Yao, Amundi Investment Institute} Before the results came in, he said "a narrow blue wave may be largely priced in," and that the size of the majority would matter most.^{Chris Weston, Pepperstone}

Before (overnight)

US futures

By 2:13 AM CT, S&P 500 E-minis were up 11.25 points (0.15%), Nasdaq 100 E-minis up 72.75 points (0.26%) and Dow E-minis up 237 points (0.46%), per Reuters, after the earlier slide.
Russell 2000 futures were up 0.7% after losing 1% earlier, per Reuters.
Tesla and SpaceX fell about 4.5% to 5% on Germany's Tradegate platform, versus declines of 0.3% to 0.9% for other Big Tech names, per Reuters.
AMD rose about 6% premarket after its third-quarter results beat expectations, with data-center sales nearly doubling, per Yahoo Finance.

Asia (per AP)

Index	Move	Level
Nikkei 225 (Japan)	−1.4%	62,188.63
Kospi (South Korea)	+0.6%	5,683.80
Hang Seng (Hong Kong)	+1.1%	23,791.61
Shanghai Composite	+2.2%	3,686.17
S&P/ASX 200 (Australia)	−0.6%	8,834.50
Taiex (Taiwan)	−0.8%	—

The split is telling: AI-heavy Japan and Taiwan fell, while China and Hong Kong rose. He expects declines in Japanese AI stocks to be limited, given their solid profits, though the market may be cautious about data-center projects in Texas.^{Kazunori Tatebe, Daiwa Asset Management}

Europe

The STOXX 600 was up nearly 1% by 3:27 AM CT, after STOXX futures fell as much as 1.4% early, per Reuters.
Novo Nordisk rose after raising its annual forecast, per Reuters.

Bonds, dollar, oil

The 10-year Treasury yield was down 3 basis points at 4.92% in the European morning, after dipping as low as 4.89% overnight, per Reuters. "Bonds are coming out as the clear winner as markets put the AI trade on the chopping block."^{Prashant Newnaha, TD Securities}
The dollar fell 0.4% to 158.12 yen, and the euro rose 0.4% to $1.133, per Reuters.
Brent crude was down 0.4% at $103.17 a barrel, per Reuters. Reuters noted that the effective blockade of the Strait of Hormuz has reshaped energy flows and fed into inflation and rate expectations.

Gold

Spot gold was at $4,042.20 an ounce at 4:44 AM CT, up $111.80 (2.85%), per Kitco. On Tuesday morning, spot gold traded near $3,938, down 0.2%, after September job openings came in at 7.52 million, above forecasts, per Kitco.
A Democratic sweep could weigh on tech and AI data-center investment, reduce the Fed's need to hike and lower real yields, a backdrop he sees as favorable for gold.^{Christopher Vecchio, Tastylive}
She remains bearish on gold's trend, saying "the flight to safety in gold has been broken" as investors turn to Treasuries.^{Michele Schneider, MarketGauge}

The calendar

Time CT	Event	Consensus	Why it matters
7:15 AM	ADP private payrolls (Oct)	+70K (prior +90K)	First read on hiring before Friday's jobs report
7:30 AM	Treasury quarterly refunding announcement	—	Bond supply plans can move yields
8:45 AM	S&P Global US services PMI, final (Oct)	Flash (preliminary) reading 57.9	Confirms the services picture
9:00 AM	ISM services index (Oct)	54.7 (prior 54.9)	Services strength feeds the Fed hike debate
Company times	Earnings incl. Qualcomm, Arm, Uber, McDonald's, CVS Health, Datadog, MercadoLibre, Kraft Heinz	—	Qualcomm and Arm test the chip trade after the vote
Thu	Bank of England policy decision	—	Global rates backdrop
Fri	US October jobs report	+65K, 4.2% unemployment (Reuters poll)	The week's main data release

Consensus figures for ADP and ISM services are from Yahoo Finance's calendar. In its August statement, the Treasury said it anticipates keeping nominal coupon and FRN auction sizes unchanged "for at least the next several quarters," and it set today's announcement for 8:30 AM ET.

Correction (Nov 4, 1:15 PM CT): An earlier version listed 57.9 as the prior reading for the S&P Global services PMI. It was October's flash (preliminary) reading, published Oct 23.

What's priced in

The Fed held its target range at 3.75%–4.00% on October 28 in a 10–2 vote; Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented in favor of a quarter-point hike. The statement said economic activity is "expanding at a strong pace" and inflation "remains elevated."

On Tuesday afternoon, before the results, CME FedWatch showed about a 79% chance of a December hike, per Reuters. Overnight's drop in yields hints traders may be trimming those odds; check the live tool before the open.

Markets appeared to be pricing in the possibility of a stronger Democratic showing, which lowers fiscal-stimulus expectations and helps explain the softer dollar, and gridlock doesn't necessarily mean weaker corporate earnings.^{Charu Chanana, Saxo}

The risk of a $5,000 payment to every adult, which he had seen as a 5% tail risk, is now gone; it would have caused a severe Treasury reaction.^{Andrew Lilley, Barrenjoey}

What could move NQ, ES and gold (general tendencies, not predictions)

Services and hiring data: when ISM services or ADP come in hotter than expected, yields have tended to rise on hike fears, which has often weighed on rate-sensitive tech and on gold. Softer numbers have tended to do the opposite.
The refunding: a surprise increase in planned auction sizes has historically pushed longer-term yields up; a steady message tends to pass quietly.
AI and chips: with the AI trade at the center of the election reaction, Qualcomm and Arm results after today's session could carry extra weight for NQ. Democratic control may add regulatory pressure on tech and AI and slow AI-driven growth.^{Jake Dollarhide, Longbow Asset Management} AI sentiment, not politics, is the bigger market driver.^{Tai Hui, J.P. Morgan Asset Management}
Oil and geopolitics: with Brent above $100, oil swings tied to the Iran conflict feed straight into inflation expectations and Fed pricing.

What we're watching

Whether the overnight rebound in futures holds through the 8:30 AM CT cash open.
Whether gold holds above $4,000 once US data hit.
How the 10-year yield reacts to ISM services and the refunding; it has been the cleanest read on post-election sentiment.
Investors overreacting to the "blue wave," not the result itself, is the bigger market risk.^{Michael Arone, State Street Global Advisors}

The short version (the what and the result)

Democrats won both chambers of Congress; Nasdaq 100 futures fell as much as 2.4% overnight on AI-oversight worries, then turned slightly positive.
Gold rose about 2.9% to above $4,000 as the dollar and Treasury yields slipped.
Today: ADP payrolls (7:15 AM CT, +70K expected), the Treasury refunding (7:30 AM CT), ISM services (9:00 AM CT, 54.7 expected), and Qualcomm and Arm earnings.
Before the results, FedWatch showed about a 79% chance of a December hike.