Wall Street Holds Its Breath as US Midterms Begin and the AI Trade Wobbles

Voting got under way in the US midterm elections on Tuesday, November 3, and Wall Street responded the way it usually does before a binary event: by doing as little as possible. By midday in London, S&P 500 futures were down about 0.2%, Nasdaq 100 futures were little changed, and Dow futures had slipped around 0.8%. The caution followed a split session on Monday, when the S&P 500 fell 0.5% to 7,542.27 and the Nasdaq Composite dropped 1.07% to 25,164.32, putting the tech-heavy index into correction territory, while the Dow managed a 0.43% gain to 51,992.19. That divergence sums up the moment: old-economy stocks are holding up while technology slides.

The nervousness was global. Europe’s Stoxx 600 fell about 0.5%, Asia’s regional benchmark slipped 1.2%, and South Korea’s Kospi and Taiwan’s index each dropped roughly 3.6%. Two earnings disappointments set the tone: Apple fell nearly 4% after warning that holiday-quarter margins would tighten on rising memory-chip costs, and Palantir slid more than 8% on a weak outlook. A gauge of US-listed chipmakers had already hit a six-month low, nearly 30% below its June peak. Beneath the daily moves sits a deeper question: after four years of booming AI investment, when does the spending start paying for itself? PIMCO chief executive Emmanuel Roman warned in Hong Kong that a downturn will come at some point, while BlackRock strategists said they remain convinced by the technology but are being selective, noting that heavy capital spending is squeezing free cash flow into negative territory for some firms.

The election itself is the second layer of risk. Prediction market Polymarket puts the chance of Democrats winning both chambers at roughly 77%, an outcome traders link to tougher oversight of artificial intelligence and more corporate regulation, including a stronger political case against data centres. A surprise Republican sweep, by contrast, would probably lift bond yields and the dollar, according to Standard Chartered. Yet history offers some comfort: Indosuez Wealth Management’s Alexandre Drabowicz noted the S&P 500 has typically resumed its climb once midterm uncertainty clears. Results are expected overnight, though close races in some states may take days.

Elsewhere, the picture was calmer but still telling. Brent crude traded near $106.50 a barrel, recovering part of Monday’s plunge of more than 7% as traders weighed conflicting signals over a possible US-Iran deal. Gold eased about 1.1% to near $3,904 an ounce, the dollar index hovered around 101.7, close to a one-month low, and the 10-year Treasury yield sat near 4.91%. Thursday brings the week’s other big decision: the Bank of England is widely expected to raise its base rate from 3.75% to 4%, its first increase since August 2023, after September inflation jumped to 3.5%. A Reuters poll found 54 of 63 economists expecting the move, and markets price roughly a 96% chance.

What to watch next is a crowded calendar rather than a single result. Alongside the election count come Tuesday’s US job openings data, Wednesday’s ADP figures and Treasury refunding, Thursday’s Bank of England decision, and Friday’s jobs report. Any one of them could move yields, and through yields, everything else. For readers following how politics, rates and currencies connect, our forex section explains the chain from bond yields to exchange rates, and the forex tools page has calculators for sizing risk before trading a week like this one. (Not financial advice.)