Stocks erase midterm selloff as gold jumps 3.1%, dollar slides

The latest:

Global stocks wiped out an early selloff triggered by the Democratic sweep of Congress, with equities turning firmly higher as dip-buyers returned to a bruised market, Bloomberg reported. Treasuries and gold rallied alongside them, while the dollar fell against all Group-of-10 peers. Trump congratulated Democrats on a good job after they took both chambers and several governorships.

Details:

• The reversal: Contracts on the Nasdaq 100 erased losses of as much as 2.4% to trade 0.9% higher, according to Bloomberg. The benchmark had entered a correction on Monday after weeks of selling driven by concerns that spending on artificial intelligence capacity had run too far.
• Europe and Asia: The Stoxx 600 advanced more than 1%, extending an October in which it beat the S&P 500 as investors rotated out of the AI trade. South Korea’s Kospi erased a drop of as much as 4%, with Samsung Electronics and SK Hynix each down less than 1%. Taiwan’s Taiex trimmed its decline to 0.8%.
• The losers: Defense stocks fell as investors scaled back bets on further increases in military spending. Shares in Tesla and SpaceX, both tied to Republican megadonor Elon Musk, declined about 3.5% each before Wednesday’s US open.
• Renewables surge: Clean energy names rallied across three regions on expectations a Democratic Congress favors solar and battery supply chains. Denmark’s Orsted and SMA Solar each rose more than 8%, Vestas gained about 5%, and South Korea’s Hanwha Solutions jumped 19%, with HD Hyundai Energy Solutions up 12% and OCI Holdings up 10%.
• Bonds: Five-year Treasury yields dropped as much as nine basis points to 4.67% and the 10-year fell seven to 4.89% before paring the move, on bets a Democratic Congress constrains Trump’s fiscal agenda and reduces future borrowing. German 10-year yields slipped one basis point to 3.32%, UK gilts three to 5.23%.
• The dollar: A Bloomberg gauge of the greenback fell as much as 0.5%, its steepest drop in two months, on concern the result chips away at the US exceptionalism story if tighter scrutiny of AI investment weighs on growth. The euro gained 0.5% to 1.1253 and the pound 0.6% to 1.3489.
• Gold: Bullion jumped as much as 3.1%, the biggest advance since August, moving above $4,000 an ounce and erasing the previous session’s retreat. Lower yields support gold because it pays no interest, while a weaker dollar makes the metal cheaper for most buyers.
• Crypto split: Digital assets were mixed as the outcome clouded the path for industry-backed legislation. Bitcoin fell as much as 2.8% to below $76,000 as results came in, then rebounded. It was already under pressure from spot Bitcoin ETF outflows and the fallout from last week’s record Binance hack.
• The bull case: Steven Chiavarone, chief investment officer for global equities at Federated Hermes, said no US midterm election has ended the world and this one will not either. His focus, he said, is on strong growth, infrastructure buildout and “what may be the earnings cycle of our lifetime.”

Background:

Trump had pledged to make the US the crypto capital of the world, build a strategic Bitcoin reserve and ease regulatory pressure on digital assets. A Democratic Congress puts that legislative agenda, along with his tax and spending plans, in question.

Between the lines:

The sector map reads as a bet on divided government rather than panic. Renewables rallied while defense names and Musk-linked stocks fell, matching the assumption that military spending slows and clean energy policy firms up. Falling Treasury yields and a softer dollar point the same way: less fiscal stimulus, less borrowing, and gold rewarded by both.

What’s next

Watch whether the Nasdaq 100 exits correction territory after Wednesday’s US open, how Bitcoin trades as ETF outflows continue, and whether gold holds above $4,000 an ounce once post-election positioning settles.