Democrats Projected to Win Both Chambers; Stock Futures Slide Overnight, Then Recover

Democrats were projected to win control of both chambers of Congress in Tuesday's Nov. 3 midterms, and U.S. stock futures fell sharply overnight as results came in, then recovered by Wednesday morning. The Fox News Decision Desk projected Democratic control of the House and the Senate, and CNBC's live coverage said the Associated Press projected Democrats would win both chambers.

Late Tuesday, Fox Business reported S&P 500 futures down 1.3%, Nasdaq-100 futures down 2.2% and Dow futures down 0.8%. CNBC said Nasdaq-100 futures hit 27,615.75, their lowest since July 30. By about 5:40 a.m. ET Wednesday, CNBC showed Dow futures up 803 points, or 1.5%, S&P 500 futures up 1% and Nasdaq-100 futures up 0.5%. Fox Business's 6:15 a.m. update had S&P 500 futures up 0.35% and Nasdaq-100 futures up 0.16%.

Prediction markets had increasingly pointed to Democratic control as results arrived, with more than $1.48 billion wagered on the midterms. Kalshi odds cited by CNBC before races were called were about 90% for the Senate and 97% for the House. Investors weighed taxes, government spending, AI, Big Tech, defense, health care, banking and crypto regulation, and the 10-year Treasury yield fell 6 basis points to 4.906%. Saxo's Charu Chanana told Reuters the initial selloff "may not necessarily be sustained".

Palantir (PLTR) fell 1.65% at Tuesday's close after its earnings report, during the regular session and before CNBC had called any races, so the move was not an election effect. That session ended with the S&P 500 up 0.3%. Ned Davis Research notes the S&P 500 rose through year-end in five of eight midterm cycles since 1930 when the president's party lost the House.