Wall Street edges higher after Democrats sweep midterms

Wall Street markets rose on Wednesday, reversing sharp early losses as Democrats continue to gain ground in the US midterm elections.

US stocks swung from losses to gains as investors struggled to evaluate the possibility of tougher regulation, higher taxes and oversight of areas such as AI and ‌cryptocurrencies.

Stock futures in the US had initially declined after the results, with the tech-heavy Nasdaq 100 falling as much as 2.4% and S&P 500 futures down 1.4% as traders reacted to the likelihood of a "blue wave" sweeping Washington.

However, they clawed back those losses, with futures up 0.16% and 0.35% respectively, after Donald Trump accepted the election results and acknowledged that the war in Iran played a role in Republicans' losses.

A decisive win for the Democrats could exacerbate volatility in asset prices, especially in the artificial intelligence trade.

The party made gains in key data-centre states, where public opposition to the industry has been growing, including in Georgia and Texas, which could have implications for the AI buildout there.

"Those two states effectively make up about a third of all AI data centre spend and projects," said Tapas Strickland, chief market strategist at Moomoo ANZ in Sydney.

"The potential for it to slow is very much there, and that ‌would obviously cascade through to the rest of the AI sector," he added. "I don't think it necessarily stops the whole AI train, but it does slow it down."

Shares in tech giants such as Microsoft, Amazon and Nvidia were all trading lower in extended trading.

The outcome may also have broad implications across the economy - affecting everything from defence spending to the regulation of financial assets.

US midterms - live updates as results come in

A very different Congress

Donald Trump's Republican Party has controlled both chambers of Congress during the first two years of his second term.

The Democrats have now taken both the House of Representatives and the Senate.

A Democratic-led Congress could exert greater scrutiny over artificial intelligence companies as public opposition to data centres grows.

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The US elections have weighed heavily on the markets for weeks - as well as concerns that heavy spending on artificial intelligence is yet to provide sufficient returns.

Rising interest rates and sticky inflation, which has been above the Federal Reserve's 2% target for several years, are also playing a factor.

However, in all 20 of the midterm years seen since 1946 - the S&P 500 has been higher 12 months after election day, with an average gain of 14.4%.

Despite the pullback in the early hours of Wednesday, the Nasdaq 100 remains up 12% in the year to date, with the S&P 500 advancing 10%.

Looking ahead, Seth Hickle of Mindset Wealth Management said: "I expect volatility to remain elevated over the next few weeks, regardless of the election outcome."

Freedom Capital Markets' chief market strategist Jay Woods told Sky's US partner CNBC: "Now all eyes turn to the president and the reaction that we may get from him.

"Will there be contested elections, will there be more uncertainty thrown into the ranks? That's where the market could really get riled up."

(c) Sky News 2026: Wall Street edges higher after Democrats sweep midterms