Blue Wave Pops Market, But Can It Overcome Technical Hurdles?: 8 Key Items Shaping the Stock Market Wednesday

These are the early headlines and other items poised to influence the market at the start of trading Wednesday. As we share this collection of market drivers, U.S. equity futures point to a robust open.

1. Democrats have taken control of the Senate and House as a blue wave surged across the country and voters delivered a rebuke of President Trump. The party flipped Senate seats in Maine, Iowa, Kansas, Ohio, Texas, South Carolina and North Carolina and numerous seats in the House. (WSJ) Crude oil prices were falling Wednesday morning as markets assessed the shifting political landscape in Washington following the U.S. midterm elections, with President Donald Trump explicitly linking Republican losses to high pump prices and the war with Iran. (Barron’s)

The above sums up the results of the midterm elections, but we’ll remind readers that here at the Pro Portfolio our focus will remain on passed legislation. That means watching to see what happens between now and when Democrats take over both chambers of Congress. That includes whether we have another government shutdown in December, as well as the forthcoming Democratic agenda. Other items to watch include what comes next in the Iran war and its impact on energy prices, the U.S. fiscal outlook, defense spending and regulation in areas such as healthcare, banking and cryptocurrencies.

2. With Democrats winning control of both the Senate and the House of Representatives after Tuesday’s vote, markets saw the potential for legislative gridlock between US President Donald Trump’s administration and the newly elected Democratic Congress. (Reuters) While a wave of blue swept across key congressional races, stock indexes were in the green early Wednesday as a classic post-midterms relief rally kicked into gear and AI momentum picked up after blowout tech earnings. Historically, equity markets rally following midterms simply because political uncertainty is removed. Gridlock is predicted in terms of passing legislation, not the makeup of the next Congress is beginning to crystallize. That reduces the risk of aggressive corporate tax hikes, sweeping regulatory overhauls, or abrupt policy interventions. Investors are deploying cash that had been parked on the sidelines during Tuesday’s voting. (Barron’s)

That expectation of gridlock in Washington is driving U.S. equity futures higher, but we’ll want to see where, what is shaping up to be a sharp snapback today, it leaves the S&P 500 and Nasdaq Composite relative to key technical levels. Those levels include the 50-day moving average for the S&P 500 near 7,693 and the 100-day moving average for the Nasdaq Composite near 26,248.

And lest we forget, we have several pieces of October data coming today that have the potential to refocus the market on the pace of job growth and inflation pressures.

3. Advanced Micro Devices rose 7.3% in premarket trading after the US chipmaker forecast faster growth through 2027, reassuring investors that demand for AI infrastructure remains strong… The company’s strong outlook highlighted growing momentum in its server processor business, signaling that spending on AI computing was extending beyond Nvidia’s accelerators, which dominate the market… Su said on Tuesday that the company expects overall revenue to rise more than 80% in 2027, which is higher than the 77% growth analysts estimate, according to LSEG data. (Reuters) While AMD’s PC and gaming sales shrank about 8% from last year, that decline was already baked in. The company avoided the massive PC underperformance that doomed Intel last week, and it is also more reliant on AI in general. Data-center sales accounted for about 63% of total revenue in the third quarter. A year from now, Wall Street expects that to climb to three-quarters of the top line. (Barron’s)

4. Arista Networks expects fourth-quarter results to surge again after reporting better-than-expected third-quarter earnings and its fastest year-over-year revenue growth since its IPO more than a decade ago… The company is working with chip makers, including AMD, Arm, Broadcom, and Qualcomm, as well as Meta and Microsoft, on equipment for AI networks. (Barron’s) Super Micro Computer reported earnings after the market closed Tuesday, turning in results that were strong enough to boost the stock… SMCI posted fiscal first-quarter adjusted earnings of $1.81 per share on revenue of $19.95 billion. Analysts surveyed by FactSet expected adjusted earnings of $1.23 per share on revenue of $17.53 billion (Barron’s)

Results from Advanced Micro Devices (AMD), Arista Networks (ANET) and Super Micro Computer (SMCI), and comments alongside quarterly results this week from Eaton (ETN) reaffirm the demand for AI infrastructure and that chip industry capacity is poised to remain tight into 2028.

5. Estee Lauder said on Wednesday it aims to lift its adjusted operating margin by as much as 5.6 percentage points over the next three years, as the cosmetics maker builds on progress in its turnaround. The company is targeting an adjusted operating margin of 16.5% to 18.5% in fiscal 2030, compared with its fiscal 2027 guidance ⁠of 12.9% to 13.8%… Estee Lauder also said it aims to ⁠deliver mid-single-digit organic sales growth annually and double-digit adjusted earnings per share growth through fiscal 2030. (Reuters)

Dovetailing with this announcement, Estee Lauder (EL) will hold its Capital Markets Experience event today. Given our recent addition to the Portfolio’s Bullpen, we’ll be interested in the underlying demand drivers Estee management points to and what it has to say about the China market. As we ruminate on those comments, we’ll be contrasting them against what Coty (COTY) and Interparfums (IPAR) say when they report their quarterly results today.

6. CVS Health has decided to split in two, reversing one of the signature deals that defined an era of health industry gigantism. One company will house its insurance giant Aetna and pharmacy-benefit manager Caremark, the other its 9,000 retail pharmacies. The breakup, planned for early 2028, comes a decade after the near-$70 billion merger that knit together Aetna and CVS, creating one of a new breed of giants that brought together multiple businesses spanning more of the healthcare industry. (WSJ)

With CVS (CVS) reporting this morning, we’re going to hear more about the strategic rationale behind this move. Will this be a company-specific event or the start of a decoupling wave? If it’s the latter, that would be a positive development for investment banking advisory activity and fees.

7. Economic data today per TipRanks: MBA Mortgage Applications Index (Weekly), ADP Employment Change (October), Imports/Exports (September), S&P Global Services PMI (October), ISM Services PMI (October), EIA Crude Oil Inventories (Weekly).

8. Companies reporting today per TipRanks: AM – Brinks (BCO), Clear Secure (YOU), CVS Health (CVS), Datadog (DDOG), Dine Brands (DIN), Emerson (EMR), GlobalFoundries (GFS), Insulet (POD), Kraft Heinz (KHC), McDonald’s (MCD), New York Times (NYT), Reynolds Consumer Products (REYN), Trex (TREX), Uber (UBER). PM – AMC Entertainment (AMC), ARM (ARM), Blue Owl Capital (OBDC), Cava (CAVA), CF Industries (CF), Chime (CHYM), Cirrus Logic (CRUS), Coty (COTY), Dutch Bros (BROS), e.l.f. Beauty (ELF), Fastly (FSLY), Interparfums (IPAR), Lumen (LUMN), Qualcomm (QCOM), Rapid7 (RPD), SiTime (SITM), Snap (SNAP), Tanger Factory Outlets (SKT), Veeco instruments (VECO), Zillow (ZG).

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At the time of publication, TheStreet Pro Portfolio was long AMD, ANET, ETN and NVDA.