by Gavyn Jensen-Schneider, Research Associate

US Midterm election results alleviated some political uncertainties and introduced others, leading to a whipsaw week for markets. The S&P 500 finished the week down -2.68%, while the Nasdaq fell -3.37%. The 10-Year Treasury yield, an interest rate indicator, closed at 4.86%, down -7 basis points (bps) from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, closed at 4.25%, down -2 bps from last week.

Wednesday’s post-election pop of +1.6% for the S&P 500 came as electoral uncertainties resolved into a gridlocked government. Wall Street has historically liked congressional gridlock as federal policy is typically more predictable, reducing uncertainty. Thursday saw an immediate reversal of fortune as the S&P 500 and Nasdaq pulled back by -4.4% and -5.5%, respectively. New uncertainties arose from state and local election results and what appears to be a changing regulatory landscape, particularly involving data centers.

Measures to prohibit, limit or regulate data center development were on local ballots in 10 states. Voters nearly universally voted for these measures. Mounting local opposition could slow data center construction and provide a signal to local, state and federal lawmakers that constituents want additional AI regulation. However, this might not be all bad for AI technology and related industries. A slowdown in data center construction could reduce the price competition for components and give more time for advanced research & development—thereby lowering input costs, growing compute efficiency, and increasing chip price performance.

The US labor market continues to build resiliency. September job openings rose to 7.5 million, coming in 400k ahead of Wall Street estimates. The October nonfarm payrolls came in strong at 165k, a round 100k ahead of expectations, which helped lower the unemployment rate to 4.1%. August and September nonfarm payrolls were revised up, bringing the 3-month average net new jobs to +137k. Strengthening employment trends place more pressure on the Federal Reserve to hike interest rates at its next meeting, though we’ll get one more employment report before the Fed meets in December.

Earnings season is winding down, with 88% of the S&P 500 having already reported. Notable earnings reports next week come from neocloud CoreWeave (CRWV) and semiconductor manufacturing supplier Applied Materials (AMAT). Inflation data is back with the October readings of CPI and PPI inflation; year-over-year CPI numbers will not be published as there was no CPI reading in October 2025 due to a prolonged government shutdown.