Good morning,
 
Yesterday as Americans headed to the polls it was a mixed day in markets. Oil prices continued to move modestly lower amidst more headlines suggesting that diplomatic efforts are underway. Equities opened around unchanged, rallied through the morning, only to fade in the back half of the session. The S&P 500 ended the day up 0.5% as tech bounced, while some of the defensive sectors that had outperformed recently pulled back. Staples and materials led to the downside falling nearly 2% while energy, financials, healthcare and Utilities were also lower.
 
Last night’s results were decisive with Democrats taking both the House and Senate as well winning multiple Governor races most notably in all of the “data center states” (TX, GA, OH, PA, MI etc.). The ultimate outcome was not all that surprising as Blue Sweep has been trading between 65% - 75% in prediction markets for the last month, but the magnitude/breadth was a surprise. It has been a volatile evening/pre-market with S&P futures initially selling off ~1.5% as polls were closing but started to bounce around midnight as President Trump began making comments saying he would accept the outcome, suggested he’d be willing to work with Democrats and downplayed the prospects of bombing Iran. S&P futures are up just ~1% while futures on the Russell 2k and Dow Jones Industrial Average are up closer to 2%. The VIX is around 18 from north of 20.
 

 
The election results are creating a lot of cross currents in the pre-market. The most obvious is weakness in the AI trade. Chips/memory stocks are down 2-3% but the real weakness is in neoclouds, energy/grid infrastructure and IPPs which are all down >5%.

• Trading higher
  • Alternative energy/renewables
  • Healthcare - Hospitals, Medicaid
• Trading lower
• Defense stocks under pressure down 1 - 4%
• SPCX/TSLA both down >5% while wireless companies rallying
• Detention Centers/Correctional facilities

 
Treasuries rallied overnight but are off the best levels with yields down 2-5bps across the curve. The USD index is down ~0.5% trading just over $101. The ADP Employment data came in ahead of expectations with 86k added split between small, medium and large companies. Pay metrics held steady from last month up 3% for job stayers and 4.8% for job changers. The Treasury left auction sizes and mix unchanged and suggested that would remain constant for the next couple of quarters though they continue to monitor the situation. After the open ISM Services will be released.

• US 2yr -3bps to 4.61%, 5yr -5bps to 4.72%, 10yr -5bps to 4.92%, 30yr -3bps to 5.30%
• USD index: -$0.52 to $101.21

European equities are sharply higher, with major indexes approaching gains of 2%. Banks are seeing strong gains with several majors up ~5%. Pharma is also seeing solid gains as are consumer goods. Tech and Industrial names are lagging. European inflation was on the screws, coming in at 4.0% y.y on the headline and 2.5% core. Final Service PMIs were tweaked lower. Tech Sweden’s central bank raised its policy rate 25bp to 2.0% as expected. The Nikkei fell below its 200d ma for the first time since June 2025 but ended well off its lows, though finished down over 1%. Most sectors were in the red after the market was closed yesterday for a holiday. The big tech names Kioxia, Tokyo Electron and Softbank were down 3-5%. Despite South Korea’s tech exposure, the Kospi ended higher as the mega-duo SK Hynix and Samsung saw only modest gains while the rest of the market registered broad gains. China saw sharp rallies with the Hang Seng and Shanghai up 1-2%. Beaten up Tech and AI stocks were among the leaders (CATL +4%, SMCI +9%, Cambricon +10%). Local ETFs favored by the “national team” reportedly saw record inflows over the past two days as officials unleashed measures to contain equity markets. Chipmaker YMTC postponed its IPO until 1H27, coming after news that regulators told banks to pause IPOs and large share sales by shareholders. The private Rating Dog Services PMI was weaker than expected, falling to 50.8 vs 51.6 last month and missing the 51.5 estimate.
 

 
Oil prices are adding to this week’s losses down ~2.5% with ICE Brent trading right around yesterday’s low ~$101. Natural gas prices in Europe and down >4% also adding to this week’s weakness. Precious metals are rallying sharply though copper is pulling back modestly. Ag is mixed. Crypto is an area to keep an eye on. It initially sold but has bounced back trading modestly higher.
 

 
Earnings:
After-Market (Tues): AIG, AMD, AMGN, ANET, ASH, BKNG, IFF, JELD, JKHY, MOD, MOS, MTDR, PRIM, PRU, SMCI, SWKS, TOST, TREE, XYZ
Pre-Market: BMW, CDW, COR, CRCL, CRL, CVS, DDOG, EMR, FLUT, GWW, KHC, MCD, MLM, NOVO, NYT, OC, PODD, Q, SWK, UBER, W, YOU
After-Market: AFL, ALB, ALL, AMC, AMCR, APA, APP, ARM, BIO, BROS, CAVA, CF, COHR, COTY, CPAY, CW, ELF, ES, EW, EXPE, FICO, FIG, FSLY, GNK, GNL, GT, HUBS, ITT, LUMN, MCK, MET, MSI, PAYC, PTC, QCOM, QGEN, RCUS, SNAP, TPL, WOLF, WTS, WU, ZG
 
Economic Data:
US:

• Mortgage Apps: -1.2% w/w prior 3.4%; 30yr 7.3% prior 7.37%
• ADP Employment: 86k vs. 69k cons., prior 90k
• 9:45 S&P Global Services PMI (final)
• 10:00 ISM Services PMI
• 10:30 Oil Inventories

Global:

• China Rating Dog Services: 50.8 vs. 51.6 cons., prior 51.5
• EU Inflation/Core: 2.5%/4% vs. 2.5%4% cons., prior 2.5%/3.8%