Dow Futures fluctuate slightly around the neutral point, as market participants assess the implications of a significant Democratic win in the American midterm elections and start to anticipate the forthcoming release of crucial employment figures later in the week. Chipmakers in the U.S. and Asia are experiencing a downturn as anticipation grows that Democrats may intensify regulatory oversight of the artificial intelligence sector. Concurrently, Qualcomm’s shares are declining due to subdued demand for smartphone chips.
Dow futures exhibited a mixed performance on Thursday. By 03:03, the S&P 500 futures contract had decreased by 15 points, or 0.2%, while Nasdaq 100 futures experienced a decline of 289 points, or 1.0%. In contrast, Dow futures saw an increase of 169 points, or 0.3%. The primary indices on Wall Street experienced an uptick on Wednesday, as market participants sought to assess the ramifications of the midterm elections, which will result in the Democrats assuming control of both legislative chambers beginning in January. Some analysts posited that political gridlock – with Republican President Donald Trump and a Democratic Congress constraining their respective agendas – may mitigate the risk of policy surprises, thereby offering a degree of stability for financial markets. Meanwhile, oil prices declined on hopes that the U.S. and Iran are now more likely to find a diplomatic resolution to their conflict, which could enhance the outlook for inflation and reduce the necessity for the Federal Reserve to significantly increase interest rates, analysts noted. They added that megacap tech profits and free cash flow may increase if Democrats attempt to slow the rapid development of artificial intelligence, while fewer AI-related bond issues “would also help keep a lid on bond yields.” And “Financial markets put a positive spin on the blue wave,” the analysts said.
Yet the prospect of a decelerating AI build-out weighed on U.S. semiconductor stocks overnight, initiating a selloff that bled into chipmaker-heavy indices in South Korea and Taiwan. AI chip giant Nvidia experienced a modest decline in after-hours trading, a trend mirrored by peers Advanced Micro Devices and Intel. Shares of memory-chip titans SK Hynix and Samsung Electronics in South Korea experienced a notable decline. In Taiwan, Foxconn Technology Group, the largest contract electronics manufacturer globally, experienced a decline of over 3%, while leading contract chipmaker Taiwan Semiconductor Manufacturing Co. saw a decrease of 0.88%. Analysts have expressed concerns that Democrats may leverage their increased power in Congress to implement more stringent regulations on the AI sector, particularly focusing on the expansion of large data centers. Democrat Gina Hinojosa’s election as governor of Texas, where a number of large-scale data center projects are planned, may also be a precursor to more stringent data center rules in the state, analysts noted.
Elsewhere, shares of Qualcomm experienced a decline of over 8% in after-hours trading, as a positive outlook for the chipmaker’s data-center division was counterbalanced by disappointing sales of its smartphone chips. Revenue from the handset chip division declined by 26% to $5.14 billion in the fourth quarter, falling short of expectations of $5.25 billion, as reported by a source. Data from Counterpoint Research indicates that global smartphone shipments declined by 20% in the September quarter, influenced partially by the expansion of AI data centers. This development has led to a rise in memory-chip costs, subsequently increasing the prices of smartphones. Qualcomm CEO Cristiano Amon indicated in an interview with Reuters that Android handset sales had reached their lowest point but were starting to show signs of recovery.
Oil prices remained relatively stable, hovering just above $95 a barrel on Thursday, following a significant decline of over 8% in the prior session. Investors are weighing the implications of the Democrats’ decisive victory, which may increase pressure on Trump to seek a resolution to the conflict with Iran. Brent crude futures concluded the trading session with a decline of $8.98, representing a decrease of 8.7%, settling at $94.62 per barrel on Wednesday. Concurrently, U.S. West Texas Intermediate crude experienced a drop of $7.97, or 8.3%, finishing at $88.12. Both benchmarks concluded at their nadir since August 31. The selloff ensued after a series of Democratic triumphs in both the House of Representatives and Senate, heightening anticipations that a Congress under Democratic control might limit funding for military endeavours and steer the Trump administration towards a diplomatic resolution in the Middle East. Trump acknowledged that the war with Iran had contributed to his party’s electoral defeat, while Vice President JD Vance also questioned the conflict’s political and economic costs. Investors broadly viewed the election results as possibly enhancing the chances for de-escalation, which might ultimately facilitate a greater flow of oil through the Strait of Hormuz, an essential shipping corridor for global energy supplies.
The Bank of England is expected to raise interest rates on Thursday for the first time in over three years, as policymakers seek to manage inflationary pressures resulting from the Iran war. In recent months, the pressure on the Bank of England’s Monetary Policy Committee to raise interest rates by a quarter of a percentage point has intensified. Inflation in the United Kingdom has persisted at a notably high level, rising to an 11-month peak of 3.5% in September. This increase is attributed in part to a surge in energy prices, driven by continuing supply constraints originating from the Middle East. With inflation currently exceeding the Bank of England’s target of 2%, expectations are mounting for the central bank to respond by raising interest rates this month and potentially continuing this trend into the next year.
