Wednesday there was a rally after the midterm results. Thursday, the market gave it back, plus some. Here’s what happened over the last two days, why the moves were so different, and what it may mean for your portfolios.
Stocks: Wednesday's Rally
As you know, stocks had a very strong day. It was the Dow’s best day after a midterm election since 1982.
Three things drove the rally:
The election results were clear, and the president said he would accept them, so the worry about a drawn-out challenge went away.
Many investors expect a divided government to limit big policy swings.
Oil prices fell sharply. Investors expect a Democratic Congress to increase pressure on the Trump administration to negotiate a settlement with Iran. That led to a drop of nearly 9% in Brent crude. Cheaper oil means less inflation pressure, which helped the sectors that benefit from lower gas prices and borrowing costs.
The good news is Wednesday's rally was broad, but not every part of the market joined in. Companies that rent out AI computing power, like CoreWeave and Nebius, fell more than 7% on worries about new limits on data center construction. That turned out to be a preview of what would come Thursday.
Stocks: Thursday’s Drop
At the end of the day, the S&P 500 was down over 4%, and a popular technology ETF (XLK) was down more than 8%.
The biggest reason was data centers. Democrats flipped the governor’s offices in Texas, Ohio and Georgia, and all three winners campaigned on pausing or reining in AI data centers. The fact that Texas flipped is a big deal. Wells Fargo estimates 27% of planned data center capacity is in the state. If data center construction slows, demand for chips and equipment slows too, and that is why we saw acute losses in the technology sector.
Three other things added to the selling.
Qualcomm said higher memory chip costs are hurting sales.
Oil rebounded on reports of tankers on fire in the Strait of Hormuz.
Weekly jobless claims fell back to the lowest level since 1969. Strong hiring data keeps a Fed rate hike on the table, which investors don’t typically like.
The top heaviness of the S&P 500 and other indices is a risk that continues to grow. A handful of AI companies make up a big share of the major indexes. In real numbers on Thursday, the S&P 500 had lost more than $2 trillion in value, with Nvidia alone down more than $400 billion.
Bonds
Treasury yields fell on both days. When yields fall, bond prices rise. This has helped diversified investors get the ballasting effect we expect out of fixed income.
Although the direction of rates was the same both days, the reasons were different. On Wednesday, investors expected less government borrowing and lower inflation from cheaper oil. Thursday, they bought Treasuries as a flight to safety.
It's worth noting that pressure is showing up in riskier AI-related corporate debt. As an example, some CoreWeave bonds traded as low as 79.5 cents on the dollar. A bond that cheap means investors have significant doubts about getting their money back at maturity.
The PlanWiser Approach
At PlanWiser, our investment decisions are driven by data, not day-to-day emotions based on politics or AI fallout. Our quantitative investment approach evaluates market trends, volatility, valuations, and economic conditions to determine appropriate allocations to asset categories. Additionally, we can rotate toward the areas of the market showing the strongest leadership and risk metrics. Our portfolios are designed to add growth exposure as their signals improve and to reduce risk when the data points to more challenging conditions.
Regardless of the issues that arise, our objective remains the same: respond to the economic and market data as it evolves while pursuing the best possible long-term outcomes for our clients.
Sources:
1. CFRA Research, Reuters, CNBC, AP, U.S. Department of Labor, Wells Fargo, as of November 5, 2026