Democrats Sweep 2026 Midterms, Sending Defense Stocks Down and Tech Higher as Earnings Season Accelerates

Democrats won control of both the U.S. Senate and House of Representatives in Tuesday's midterm elections, delivering what analysts called a seismic sweep that caught Wall Street off guard with its decisive margin. The Dow Jones Industrial Average jumped roughly 1,200 points on Wednesday as markets absorbed the results, with strategists noting that a large Democratic majority in Congress and President Trump's stated willingness to work with the opposition reduced political risk premiums.

Defense contractors bore the brunt of the selloff, with Northrop Grumman, Lockheed Martin, and General Dynamics all declining sharply on concerns about military spending priorities under Democratic congressional leadership and questions about U.S. commitments in ongoing international conflicts. Meanwhile, technology and consumer-facing stocks rallied broadly, with Apple reaching an all-time high and Alphabet surging after reporting third-quarter revenue of $127.6 billion, a 25% year-over-year gain marking its 13th consecutive quarter of double-digit revenue growth.

Earnings results drove sharp individual moves across the market. Datadog beat Q3 revenue expectations with $1.20 billion in sales, up 35.2% year on year, but its stock fell 16.1% after the company issued soft fourth-quarter guidance that signaled a growth deceleration. Booking Holdings reported Q3 room nights up 7% and adjusted revenue up roughly 9%, lifting its shares. Reddit, Rivian, Lyft, Carvana, and WW Grainger were among the notable gainers on their own results or guidance. Qualcomm had posted a mixed fiscal third quarter, with revenue beating estimates but earnings missing and fourth-quarter guidance coming in light at $9.7 billion to $10.5 billion in revenue.

Elsewhere in the Dow, Caterpillar extended a sharp recent decline, down roughly 30% over the prior month, leaving it and Goldman Sachs among the weakest year-to-date performers in the index. Energy names including Suncor and Cenovus slid, while Walmart, Netflix, Berkshire Hathaway, and Strategy rallied. Dominion Energy and Stanley Black and Decker also posted strong gains on the session.