Midterms: Markets react to Democratic sweep and earnings

Futures data indicated a positive start to trading on Nov. 4, with the Dow Jones Industrial Average heading for a sharp increase and the Nasdaq poised for a modest gain following a rise of more than two percent the previous evening. This market response occurred despite the recent midterm elections resulting in Democratic control of both the House and the Senate, a shift that many investors viewed as a potential headwind for the artificial intelligence trade.

Jim Cramer of CNBC described the election as a clearing event for investors. While specific legislative moratoriums on data centers were rare, the Democratic sweep signaled voter frustration with the rapid expansion of AI infrastructure. Cramer suggested that a potential slowdown in this buildout could benefit established technology firms, a thesis supported by morning rallies in shares for Microsoft and Amazon.

In the semiconductor sector, Advanced Micro Devices gave back gains it had recorded after its earnings release, joining a broader chip group under pressure. Lisa Su, the CEO of AMD, noted dramatic gains in server sales against Intel but warned of double-digit declines in PC shipments for the coming year. She attributed this outlook to tough market conditions, including high memory prices that are reducing demand in the PC market. Cramer posited that Apple might benefit from this dynamic, alongside any slowdown in data center construction. Bernstein analysts recently raised their price target for Apple to $380 from $370 while maintaining a buy rating.

Arista Networks shares climbed more than five percent after the company reported a strong third quarter. The firm beat expectations for revenue, operating margin, and earnings per share. It also provided fourth-quarter guidance that exceeded consensus estimates. The company is expanding into scale-up networking within server racks, driven by demand for networking switches. This performance suggests the data center sector remains resilient despite the election outcome.

Qnity Electronics, a DuPont spin-off specializing in semiconductor manufacturing chemicals, reported organic revenue growth of 22 percent. This growth was fueled by strength in advanced nodes, thermal management, and AI printed circuit boards. The company also increased its full-year outlooks for both revenue and adjusted earnings per share.

CVS Health announced it will split into two separate entities, allowing insurer Aetna and pharmacy benefit manager Caremark to operate independently. CEO David Joyner stated the move comes from a position of strength. Although CVS reported a strong third-quarter beat, its shares fell four percent, potentially due to historical Democratic scrutiny of health insurers.

Novo Nordisk stock rose six percent after the Danish drugmaker boosted its full-year sales and operating profit guidance. Strong sales of its GLP-1 drugs for diabetes and obesity drove the improvement, with the Wegovy pill exceeding estimates. This launch helps Novo reclaim ground lost to Eli Lilly in the injectable market, where Lilly recently reported a record-high closing price. Bank of America upgraded Constellation Brands to hold from buy, citing reduced downside risk to beer volumes as immigration concerns ease. McDonald’s shares rose more than 2.5 percent after a mixed quarter, where the company beat estimates for earnings and same-store sales growth but missed on overall revenue. The stock has gained 14 percent since Oct. 7.