US stocks soared on Wednesday after President Donald Trump's party lost its sole control of Washington in the midterm elections.
Stocks generally do well in the months following any midterm US election, regardless of who wins, and the S&P 500 jumped 1.6% for its best day in three months. The Dow Jones Industrial Average rallied 3%, and the Nasdaq composite climbed 1.4%.
Stocks of hospital owners and dollar stores serving low-income Americans helped lead the widespread rally following the nationwide losses for Republicans.
Investors, meanwhile, see risks ahead for Trump's social-media company, the artificial-intelligence industry and businesses owned by Elon Musk, who donated heavily to Republicans.
The price of Brent crude oil also tumbled below $US95 and touched its lowest level in two months. Vice President JD Vance blamed Republicans' midterm losses on the war with Iran, which caused a spike in oil prices.
Wall Street weighs divided government
Strategists on Wall Street had been urging investors not to get swept up in the election because it may not matter much for the broad market in the long term.
Prices for stocks depend more on where profits for companies and interest rates are heading than on who controls what in Washington.
"Earnings trump elections," according to Brian Jacobsen, chief economic strategist at Annex Wealth Management.
Still, Wall Street may have got a preferred political scenario as Democrats are set to take control of both the Senate and the House of Representatives.
Wall Street generally prefers split control of Washington because it lessens the risk of transformative changes to the economy.
Much remains impossible to predict and Trump retains executive authority over key areas such as defence, foreign policy and, in some instances, trade.
A downbeat forecast could be that "Trump is not now a lame duck, but an angry duck" who might restart tensions over tariffs and NATO allies' levels of military spending, said Carsten Brzeski, global chief of macro at ING Bank.
An optimistic view, Brzeski said, is that Trump becomes "a tame duck ... that he will slow down any disruptive efforts and that he will put more focus on trying to win the Nobel Peace Prize by ending the two big wars without big disruption, and on trade, nothing happens but a few words."
All told, the S&P 500 rose 119.70 points to 7,688.62. The Dow Jones Industrial Average rallied 1,569.40 points to 53,356.12, and the Nasdaq composite climbed 364.50 points to 25,736.51.
Trump Media and Tesla sink
Trump's social-media company, Trump Media & Technology Group, was one of the market's bigger losers, down 24.5%.
Since briefly touching a peak of $US175 five years ago, it's dropped to $US4.49. Its main business is Truth Social, which is most well known for Trump's postings on the platform.
Elon Musk's businesses also struggled. Tesla fell 3.3%, and SpaceX sank 3.8%. Musk, a former top Trump adviser, is among the possible targets for investigations by a Democratic-controlled Congress.
AI stocks come under pressure
Trump has been a big backer of the AI industry, and Democratic victories could mean more regulation or restrictions. Concerns have grown across political parties about AI in general.
Investors see Democratic wins in Texas in particular as possibly slowing the further build-out of AI data centres. AI-related stocks came into Election Day already under pressure because of worries their prices had shot too high.
Nvidia, the chip company that quickly became the poster child of the frenzy around AI-related stocks, sank 3.2% and was the heaviest weight on the S&P 500. CoreWeave, a company that rents out access to AI chips to customers over the cloud, dropped 9.9%.
Companies that have been spending heavily on AI chips held up better. Alphabet rose 3.2%, for example. The parent company of Google had tumbled to its worst loss ever last Thursday on worries that it was spending too much on AI investments.
Military suppliers fall
A Democratic-led Congress could push Trump to pull back on the war with Iran.
That hurt stocks of companies that make weapons and other equipment for the US military, including drops of 6.9% for Lockheed Martin, 4.5% for Northrop Grumman and 2.6% for General Dynamics.
Oil tumbles as green energy rises
The possibility of pressure to pull back on the war sent the price of Brent crude oil plunging 8.7% to $US94.62.
That in turn hurt stocks of big oil companies, which had been rallying for much of the year. ExxonMobil fell 4.6%, and ConocoPhillips dropped 5.2%.
Falling oil prices usually hurt stocks of renewable-energy companies because they can lessen the incentive to switch to other energy sources. But Democratic control of Congress could light the way for companies in the solar and wind industries.
First Solar rose 4.6%, and Enphase Energy climbed 3.7%.
Healthcare and retailers rally
A Democratic-led Congress could try to reverse some of the cuts to federal healthcare and food assistance that Republicans approved in their "One Big Beautiful Bill Act."
That helped stocks climb across the healthcare industry, including a 10.3% rise for HCA Healthcare, which runs hospitals and ambulatory sites.
Retailers also benefited on hopes that Democrats may push policies to help Americans who are struggling to keep up with the fast-rising cost of living.
Dollar Tree, which focuses in particular on lower-income Americans, rose 9.6%.
Bond yields fall
In the bond market, Treasury yields sank as oil prices dropped and took pressure off inflation.
The move could also be a signal that investors see less risk of Washington piling more debt onto its already big mountain with the coming end to one-party control.
Treasury yields had climbed through the summer and reached their highest levels in decades because of worries about the US government's big debt, along with high inflation and other concerns.
A Congress controlled by Democrats could provide a check against more spending and cuts to taxes that would widen Washington's deficit.
The yield on the 10-year Treasury dropped to 4.88% from 4.95% late on Tuesday.
Global markets mostly rise
Share markets climbed across most of the world. Stocks leapt 2% in Paris, 2.2% in Shanghai and 1.8% in London.
Japan's Nikkei 225 was an outlier, falling 1.4%.
