US stock futures mixed as Democrats score key midterm election wins

U.S. stock futures were edging up Wednesday morning, reversing sharp early losses as Democrats scored key victories in the midterm elections and the Fox News Decision Desk projected the party will take control of both chambers of Congress.

S&P 500 futures were up 0.35%, while Nasdaq-100 futures rose 0.16%. Futures tied to the Dow Jones Industrial Average rose 0.84%.

The election results added to uncertainty on Wall Street as investors weighed what a shift in Washington’s balance of power could mean for taxes, government spending, artificial intelligence, Big Tech, defense, health care, banking and cryptocurrency regulation.

“Markets appear to be pricing in the possibility of a stronger-than-expected Democratic showing, which could reduce expectations for further fiscal stimulus,” Charu Chanana, chief investment strategist at Saxo in Singapore, told Reuters.

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Historically, shifts in congressional control have not derailed stocks. The S&P 500 rose through year-end in five of eight midterm cycles since 1930 when the president’s party lost the House, according to Ned Davis Research.

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Prediction markets had increasingly pointed to Democratic control of both chambers as election results rolled in, with more than $1.48 billion wagered on the midterm elections.

Chanana said investors may be concerned that Democratic control of Congress could bring greater regulatory scrutiny of AI and Big Tech, particularly as investors question lofty valuations and rising AI-related spending.

“However, lower Treasury yields could eventually provide some relief, so the initial selloff may not necessarily be sustained,” she said.

The benchmark 10-year Treasury yield fell 6 basis points to 4.906%.

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The U.S. dollar also weakened. The euro and British pound both gained against the dollar, while the dollar index fell 0.32%.

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Markets overseas also moved lower. Japan’s Nikkei fell 3%, South Korea’s KOSPI dropped 1.6% and a broad index of Asia-Pacific stocks outside Japan declined 0.5%.

FOX Business’ Eric Revell and Reuters contributed to this report.