Key Takeaways
- • The Dow rose more than 3%, roughly 1,500 points, on Wednesday after Democrats won control of Congress, as investors bet gridlock would be good for the economy and stocks, according to the New York Post.
- • The Dow gave back nearly all of those gains on Thursday, and the tech-heavy Nasdaq fell 5%, as worries grew about a left-leaning Congress and the lame-duck status of President Trump.
- • A CEO of a major Wall Street firm, quoted by the New York Post, predicted further hedge fund liquidations would add selling pressure, with tech and AI shares facing the largest losses after a recent run-up in valuations.
- • Columnist Charlie Gasparino argues the volatility is a normal price-discovery process, and cites Bob Sloan of S3 Partners on the risk that congressional probes could slow the AI buildout.
- • Investors are reportedly weighing scrutiny of AI leaders such as Anthropic's Dario Amodei and OpenAI's Sam Altman, along with pressure on banks, Tesla and SpaceX.
Summary
Wall Street reacted sharply to the Democratic takeover of Congress, according to a New York Post column by Charlie Gasparino. After Democrats won the House and Senate on Tuesday, the Dow spiked more than 3%, or about 1,500 points, on Wednesday, with the S&P 500 and Nasdaq also rising sharply. Investors initially treated divided government as a positive for stocks, reasoning that a Democratic Congress would not be able to pass a veto-proof agenda, that President Trump could use his veto pen to block tax increases, and that the White House still controlled the regulatory apparatus.
The mood reversed on Thursday. The Dow lost nearly all of Wednesday's gains and the Nasdaq fell 5%. The column attributes the reversal to concern about a left-leaning Congress, the lame-duck status of President Trump, and the possibility that new probes and hearings could slow the AI buildout. Gasparino cites Bob Sloan of S3 Partners, who suggested that AI funders might spend less if scrutiny increases. The column also notes that the AI buildout has supported job creation and earnings growth, and that current GDP growth is 3.4%.
A CEO of a major Wall Street firm, quoted in the column, expects more hedge fund liquidations to pressure equity indices, especially technology and AI shares where valuations have risen sharply. Gasparino describes the volatility as a normal part of price discovery. He also argues that the market had been relying on easy Federal Reserve policy, and that the prospect of lower rates or a pause in hikes was a near-term support. Investors are also reportedly concerned that AI executives such as Dario Amodei and Sam Altman could keep their companies private to avoid scrutiny from lawmakers including Elizabeth Warren and Maxine Waters. Banks, Tesla and SpaceX were also cited as potential targets of political pressure.
The mood reversed on Thursday. The Dow lost nearly all of Wednesday's gains and the Nasdaq fell 5%. The column attributes the reversal to concern about a left-leaning Congress, the lame-duck status of President Trump, and the possibility that new probes and hearings could slow the AI buildout. Gasparino cites Bob Sloan of S3 Partners, who suggested that AI funders might spend less if scrutiny increases. The column also notes that the AI buildout has supported job creation and earnings growth, and that current GDP growth is 3.4%.
A CEO of a major Wall Street firm, quoted in the column, expects more hedge fund liquidations to pressure equity indices, especially technology and AI shares where valuations have risen sharply. Gasparino describes the volatility as a normal part of price discovery. He also argues that the market had been relying on easy Federal Reserve policy, and that the prospect of lower rates or a pause in hikes was a near-term support. Investors are also reportedly concerned that AI executives such as Dario Amodei and Sam Altman could keep their companies private to avoid scrutiny from lawmakers including Elizabeth Warren and Maxine Waters. Banks, Tesla and SpaceX were also cited as potential targets of political pressure.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.