Stocks Rally After Midterms As Dow Jumps 1,500 Points, Oil Slides

U.S. stocks surged Wednesday, with the Dow Jones Industrial Average jumping about 1,500 points in early afternoon trading in New York, as investors piled into equities after the midterm elections while oil prices tumbled below $95 a barrel.^[1]

By early afternoon Eastern time, the Dow was up about 1,519 points, or 2.9 percent, while the broader S&P 500 gained 1.8 percent and the tech-heavy Nasdaq composite rose 1.9 percent. Brent crude, the global oil benchmark, slid 8.6 percent to $94.70 a barrel, its first move below $100 in nearly a month and a sharp reversal from recent highs. Shares of major defense contractors lagged the broader rally, with Lockheed Martin down 7 percent, Northrop Grumman off 4.2 percent and General Dynamics lower by 2.4 percent, while the yield on the 10-year U.S. Treasury note eased to 4.89 percent from 4.95 percent on Tuesday, signaling fresh demand for government bonds.^[1]

The moves came one day after closely watched midterm elections that reshaped the political landscape in Washington and helped clarify the policy outlook for investors who had been bracing for months of uncertainty. Campaigns centered heavily on the economy, inflation and energy prices, and markets had been volatile heading into Election Day as traders weighed the chances of divided government, fiscal gridlock and potential changes to tax and spending priorities. With the results firming up, investors appeared to bet that a more predictable policy path, combined with signs of easing pressure in energy markets, could support corporate earnings heading into next year.^[1]

Oil's steep decline added a powerful tailwind to the stock rally by easing some worries about input costs for manufacturers, transportation companies and consumers already strained by higher prices at the pump. Brent crude's drop below $100 a barrel for the first time in nearly a month suggested global supply concerns were moderating, at least for now, as traders reassessed demand prospects and the impact of recent production decisions by major exporters.^[1]

The sell-off in defense contractors stood out against the upbeat market mood, underscoring how specific sectors can move counter to broad indexes when investors rethink policy-sensitive businesses after an election. Large military suppliers such as Lockheed Martin, Northrop Grumman and General Dynamics, which had benefited from expectations of robust Pentagon budgets and elevated geopolitical tensions, faced profit-taking and a reassessment of future spending trajectories even as the rest of the market climbed.^[1]

Lower long-term Treasury yields rounded out Wednesday's moves, signaling a shift back toward safer assets despite the equity rally and highlighting investors' mixed view of the economic outlook. The 10-year yield's dip to 4.89 percent suggested bond buyers still see risks from high borrowing costs and slowing growth, even as stock traders welcomed a break in energy prices and greater political clarity after the midterms.^[1]

1. PBS News