Overnight US stocks | All three major stock indices rose together; the Democrats' "blue wave" boosted risk appetite; oil prices fell sharply; gold rose more than 3%.

Wednesday, Democratic election victories boosted risk appetite, and all three major US stock indices rose together. Tech giants led gains, while AI infrastructure-related stocks were sold off. Oil prices fell sharply as the market interpreted a Democratic sweep of Congress as a political signal pointing toward de-escalation of the Iran war. US Treasury yields moved lower as the oil slump pushed down inflation expectations and political gridlock was seen as likely to constrain room for fiscal deficit expansion. Gold rose more than 3%. Cryptocurrencies first fell and then rebounded. [US Stocks] At the close, the Dow Jones Industrial Average rose 1,569.40 points, or 3.03%, to 53,356.12; the S&P 500 rose 119.70 points, or 1.58%, to 7,688.62; the Nasdaq Composite rose 364.50 points, or 1.44%, to 25,736.51. The Magnificent Seven index rose more than 3%, its best single-day performance since August. Apple Inc. (AAPL.US), Microsoft Corporation (MSFT.US), and Amazon.com, Inc. (AMZN.US) each rose more than 5%, leading the tech giants higher. However, AI infrastructure-related stocks were sold off, with chip stocks, optical communications stocks, and data center-related names broadly lower. The Philadelphia Semiconductor Index closed down 3% at a six-month low, Micron Technology, Inc. (MU.US) fell 7.00%, and NVIDIA Corporation (NVDA.US) fell 3.17%. Credo Technology (CRDO.US) fell more than 9%, Lumentum (LITE.US) fell nearly 8%, and Marvell Technology, Inc. (MRVL.US) fell more than 7%. CoreWeave (CRWV.US) fell 9.90% to $48.42, a record low since its listing; Oracle Corporation (ORCL.US) fell 1.92%; IREN (IREN.US) fell 11%. The market logic is that Democrats made midterm election breakthroughs in major data center states such as Texas and Georgia, while local grassroots opposition to rapid data center expansion continues to build. If infrastructure expansion is blocked and computing power supply tightens, computing power prices could rise while capex pressure eases, which would instead help hyperscale cloud service providers with existing infrastructure improve earnings quality. Tesla, Inc. (TSLA.US) fell more than 3%, and SpaceX (SPCX.US) fell nearly 4%. The market is worried about the attitude of a Texas government under Democratic control toward Musk's companies. The sectors most sensitive to policy led gains. Among financials, JPMorgan (JPM.US) rose 4.20%, Goldman Sachs Group, Inc. (GS.US) rose 3.59%, and Morgan Stanley (MS.US) rose 4.25%. Health care and consumer discretionary also moved higher. Defense stocks bucked the trend and fell as the market worried Democrats would tighten Pentagon budgets. The Nasdaq Golden Dragon China Index closed up 3.49% at 5,722.71, briefly breaking above its 50-day moving average intraday and approaching its 100-day moving average. [European Stocks] Germany's DAX30 rose 573.05 points, or 2.22%, to 26,437.67; the UK's FTSE 100 rose 190.78 points, or 1.79%, to 10,829.21; France's CAC40 rose 157.58 points, or 1.96%, to 8,177.89; the Euro Stoxx 50 rose 142.49 points, or 2.32%, to 6,287.05; Spain's IBEX35 rose 563.70 points, or 3.00%, to 19,370.90; Italy's FTSE MIB rose 1,089.19 points, or 2.18%, to 51,031.02. [Asia-Pacific Stocks] Japan's Nikkei 225 fell 1.42%, South Korea's KOSPI rose 0.62%, India's BSE SENSEX rose 2.56%, and Indonesia's composite index rose 0.32%. [Forex] The US Dollar Index (DXY), which measures the greenback against a basket of six major currencies, fell 0.35% to 101.51. [Cryptocurrencies] Cryptocurrencies rebounded. Over the past 24 hours, Bitcoin rose nearly 4% to $80,800; Ethereum rose more than 6% to $2,440. Cryptocurrencies came under pressure in the early overnight portion of the election as the market expected stricter crypto regulation, then swung sharply higher as tech-sector rotation accelerated. [Precious Metals] In late New York trading on Wednesday (November 4), spot gold rose 3.32% to $4,060.18/oz; spot silver rose 4.87% to $52.2265/oz. [Crude Oil] WTI December crude futures closed down $7.97, or more than 8.29%, at $88.12/barrel, down more than 15.36% cumulatively from the October 30 close. Brent January crude futures closed down $8.98, or nearly 8.87%, at $94.62/barrel. The market interpreted the Democratic sweep as a political signal pointing toward de-escalation of the Iran war. US Vice President Vance explicitly attributed the Republican defeat on social media to the Middle East conflict, further reinforcing the de-escalation narrative. [Metals] LME copper closed down $25 at $14,011/ton. LME aluminum closed up $2 at $3,047/ton. LME zinc closed up $16 at $3,807/ton. LME lead closed down $2 at $1,882/ton. LME nickel closed up $432 at $15,779/ton. LME tin closed down $440 at $46,995/ton. LME cobalt closed flat. [Macro News] Democrats retake Congress in midterms, "blue wave" boosts risk appetite. According to reports, Democrats prevailed over Republicans in the US midterm elections and are expected to retake control of both the Senate and House, with multiple media outlets describing the situation as a "blue wave" or even a "blue tsunami." The market interpreted the political shift as a double positive: reduced risk and policy constraints. US President Trump said he has no plans to strike Iran immediately after the midterms. Analysts believe the rewritten congressional power balance may weaken the Trump administration's room to act, and lower post-election uncertainty is conducive to sidelined funds returning to risk assets, although expectations of tax increases and tighter regulation are also weighing on some sectors. In addition, historical data show markets generally prefer "divided government." In 10 midterm elections and 5 presidential elections that produced divided government, the S&P 500 rose an average of 15% one year later, with positive one-year returns in 14 of 15 cases. Oil slump pushes down inflation expectations, Treasuries see strong buying. The sharp drop in crude oil directly fed through to inflation expectations, with the 10-year Treasury breakeven inflation rate falling to its lowest level since August, providing fundamental support for Treasuries; the 10-year Treasury yield fell 7 basis points to 4.89%, holding below the 5% mark for a second consecutive time and marking its lowest close in two months. Analysts said the bond market also benefited from another political logic: Democratic control of Congress will constrain the Trump administration's room to expand the fiscal deficit, compressing the supply premium embedded in long-end bonds. The US Treasury's quarterly refunding statement provided additional support the Treasury announced it would keep bill and bond auction sizes unchanged "for the next several quarters" and removed the word "at least" from previous wording; the market interpreted this as implying possible future supply increases, but the near-term signal was neutral. Wall Street warns: under divided government, the 2027 debt ceiling fight will test the US Treasury "safe-haven myth." Although Treasury yields fell across the board on the Democratic victory news, Wall Street's concerns are focused on another issue the debt ceiling. At present, the US federal government has only about $800 billion of room left under its $41.1 trillion statutory borrowing limit. Strategists expect the government to hit the limit in the first half of 2027. At that point, the Treasury could use extraordinary accounting measures to free up some borrowing capacity to avoid default, but Congress must ultimately raise or suspend the debt ceiling to fully eliminate the risk of technical default. Full Democratic control of Congress means a standoff with the Trump administration over government borrowing could be prolonged. Fitch Ratings warned last month that Democratic control of Congress could increase the risk of political brinkmanship over the debt ceiling. The agency also said the outgoing Republican-led Congress could raise or suspend the debt ceiling before its term ends at year-end; otherwise the issue will become a major test for the new Congress. Investors hope for a year-end rebound, but Barclays warns: midterms won't clear the stock market gloom; AI revenue and financing are the two mountains weighing on sentiment. After a difficult October pullback, Wall Street increasingly views Election Day as a potential rebound catalyst. But Alex Altmann, Barclays' global head of equity tactical strategy, believes the election is unlikely to change the fundamental issues driving recent market volatility. The biggest forces weighing on stocks doubts about artificial intelligence (AI) returns and the cost of financing its buildout will not be resolved by this election. He also noted that although investors had already reduced equity exposure, leaving room to add back, there are few trading days left this year, and the Thanksgiving and Christmas holidays typically bring thinner liquidity. [Company News] Arm Holdings (ARM.US) Q2 results beat expectations, licensing revenue surged 50%, data center royalties doubled. The earnings report showed Arm Q2 revenue was $1.443 billion, up 27% year over year, beating analyst expectations and marking the best second quarter in its history. This was Arm's fifth consecutive quarter of year-over-year revenue growth above 20%. Driven by the full-scale explosion in AI computing demand, Arm's licensing and other revenue in the quarter reached $773 million, up 50% year over year; royalty revenue was $670 million, up 8% year over year, with data center royalty revenue doubling year over year. On profitability, adjusted net income was $566 million versus analyst expectations of $514.2 million; adjusted operating profit was $638 million versus analyst expectations of $575.7 million; adjusted earnings per share were $0.52 versus analyst expectations of $0.47. On guidance, the company expects third-quarter revenue of $1.49 billion-$1.59 billion, versus analyst expectations of $1.53 billion. Handset business drag plus memory cost squeeze, Qualcomm (QCOM.US) Q1 profit guidance misses expectations. Qualcomm's fiscal 2026 fourth-quarter earnings report showed revenue of $10.322 billion, down 8% year over year, above the market expectation of $10.1 billion; non-GAAP diluted earnings per share were $2.17, down 28% year over year, slightly above the expected $2.16. QUALCOMM Incorporated noted that component and manufacturing costs are "rising broadly." Like many chipmakers, the company is also facing higher spending due to shortages in its own supply chain and insufficient memory chip supply which in turn was triggered by surging demand for data center equipment. The handset market remains a drag on Qualcomm's results. Revenue in that segment plunged 26% last quarter to $5.14 billion, below analysts' expectation of $5.25 billion. In addition, technology licensing business QTL revenue was $1.304 billion, down 7%. The company expects fiscal 2027 first-quarter revenue of $10.4 billion-$11.2 billion, versus analyst expectations of $10.55 billion; it expects first-quarter adjusted EPS of $2.15-$2.35, versus analyst expectations of $2.32. As of press time, Qualcomm fell more than 7% after the bell on Wednesday. Coherent (COHR.US) Q1 revenue surged 50% to a record! Data center business soared 79%, targeting $3 billion in quarterly revenue. The earnings report showed Coherent's first-quarter revenue was $2.37 billion, up 49.9% year over year (up 56% on a pro forma basis excluding divestitures), and up 15.9% quarter over quarter, setting a record for a single quarter; according to market aggregation, the figure beat the analyst consensus by about 3%. Profitability was even more impressive: GAAP gross margin was 39.1%, up 254 basis points year over year; non-GAAP gross margin was 40.6%, up 184 basis points year over year. GAAP net income attributable to the company was $385 million, up 70.2% year over year and up 59.9% quarter over quarter; GAAP diluted earnings per share were $1.90, up $0.71 year over year; non-GAAP diluted earnings per share were $2.09, up about 80% year over year, beating market expectations by about 20%. By business, data center and communications was the absolute growth engine: revenue soared 79% year over year and accounted for about 82% of total revenue; industrial revenue was roughly flat year over year and quarter over quarter. The only obvious weak spot this quarter came from cash flow: net cash provided by operating activities was -$92.7 million, mainly due to seasonal working capital use and sharply expanded capital expenditures capex this quarter reached $775.5 million for capacity expansion. AppLovin (APP.US) delivered "textbook-level" results: Q3 revenue surged 55%, net margin of 66% tops the advertising industry! $1.4 billion of buybacks in the quarter. The "AI + advertising" platform AppLovin reported third-quarter revenue of $2.185 billion, up 55% year over year; net income of $1.439 billion, up 72% year over year, with a net margin of 66% (59% in the year-ago period); adjusted EBITDA was $1.842 billion, up 59% year over year, with an adjusted EBITDA margin of 84% (82% in the year-ago period). Diluted earnings per share were $4.30 versus $2.45 in the year-ago period. Cash flow performance was similarly strong: third-quarter operating cash flow was about $1.429 billion, and free cash flow was about $1.418 billion, up about 35% year over year. AppLovin continued its aggressive shareholder return strategy: in the third quarter it repurchased and withheld 4.1 million Class A common shares for about $1.4 billion almost equivalent to all of the quarter's free cash flow; repurchase spending over the first nine months totaled $2.811 billion. The board also approved an additional $3.2 billion buyback authorization, bringing total authorization to $3.6 billion as of the end of October, more than one-tenth of the company's current market value. The company's fourth-quarter guidance continued the dual tone of high growth and high margins: revenue is expected at $2.365 billion-$2.395 billion (midpoint about $2.38 billion, up about 9% quarter over quarter); adjusted EBITDA $1.995 billion-$2.025 billion, corresponding to a margin of 84%-85% meaning the upper end of the guidance range implies further margin expansion from the third quarter.