Wall Street's Blue Wave Hangover 📉

Welcome back to the Day Trading newsletter 📈

Democrats swept Congress on Tuesday, stocks cheered on Wednesday, and then the AI trade cracked on Thursday, with the Nasdaq down roughly 5% and chip stocks getting crushed.

Let’s get into it 👇️ 

🏦 The Bank of England raised its main interest rate for the first time in three years on Thursday. Governor Andrew Bailey said the next moves depend on how the Iran war plays out. The hike adds to a global backdrop where central banks are still fighting inflation rather than cutting.

📉 AMD posted blowout third-quarter results, but the stock fell hard anyway. Revenue hit $13.38 billion, with data center sales up 97% to $8.5 billion, and AMD guided fourth-quarter revenue to about $17 billion. Shares were down roughly 15% midday Thursday as the chip rout swamped good news.

💰️ AppLovin soared as much as 30% after beating third-quarter estimates. The ad-tech company reported revenue of $2.18 billion versus the $2.07 billion Wall Street expected, making it one of the few winners in a brutal session for tech.

🛢️ Oil bounced back Thursday after its steepest drop in months. Brent crude fell nearly 9% on Wednesday on hopes for U.S.-Iran diplomacy, then climbed about 2% to near $97 a barrel as doubts grew that a deal is close. The swings show how tightly energy prices are tied to the war.

🔻 Bitcoin fell back below $76,000 on Thursday. The crypto fell more than 5% after topping $80,000 a day earlier, giving back its post-election bounce as risk assets sold off. It was also rattled last week by a $6.3 billion hack at Binance.

📊 Treasury yields eased as investors ran for safety. The 10-year yield slipped to about 4.84% from 4.90% late Wednesday, per AP. It was above 5.30% last month, which is why borrowing costs for data centers, mortgages and companies have been such a worry.

💼 Layoff announcements dropped to their lowest level since 2023. Challenger, Gray & Christmas said planned October job cuts fell to a multiyear low, a sign the labor market is holding up even as stocks wobble. Friday's jobs report will show whether that holds.

🚀 SpaceX and Tesla each fell more than 9% as Texas Democratic wins rattled investors. Yorkville's Dan Ives said a SpaceX-Tesla merger now faces a much tougher regulatory roadmap to get done in 2027. Elon Musk's companies are among the most politically exposed names in the market.

Democrats won control of both the House and the Senate in Tuesday's midterms, and markets first cheered the end of one-party control: the Dow jumped about 3% on Wednesday, its best post-midterm day since 1982.

Then on Thursday the rally reversed, with the Nasdaq down about 5% and the Philadelphia semiconductor index down roughly 11% at midday. 

The S&P 500 was down roughly 3.5% around midday, its worst day since the April 2025 tariff crash, and the VIX, Wall Street's fear gauge, spiked more than 50%.

Two things changed overnight.

1. The Fed: a Democratic Senate effectively blocks the White House from confirming loyalist nominees to the Federal Reserve's seven-member board, according to Bloomberg. There are no open seats right now, and Trump has appointed three of the seven governors, so his room to reshape the Fed just got a lot smaller. Sen. Elizabeth Warren, a defender of Fed independence, is expected to chair the Senate Banking Committee and is expected to investigate crypto firms, big banks and private equity. Analysts also say the crypto Clarity Act, a bill that would set rules for digital assets, is unlikely to advance before year-end.

2. AI: Chip stocks had already been shaky on worries that data-center building could slow as borrowing costs rise. AP reports the election added a new fear: Democratic wins could mean governments push pauses on data-center construction, which would mean fewer AI chips sold. Nvidia, the heaviest weight in the S&P 500, was down roughly 8% midday and AMD roughly 15%. Analysts caution that how much of this is the election versus the AI story itself is still unclear.

What to watch:

• Friday's jobs report is the next big test for a market that is suddenly jumpy.

• Senate Banking hearings under Warren

• Any move on state or federal data-center pauses

• And a White House hearing on Trump's effort to remove Fed Governor Lisa Cook

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⚠️ Disclaimer: Not financial advice. Do your research before making any trades.