Stocks Break Losing Streak as Chipmakers Rebound While Traders Brace For The First Midterm Results

Stocks climbed on Tuesday, breaking a three-day losing streak as chipmakers rebounded and traders braced for the first results of the midterm elections.

The Dow Jones Industrial Average declined 0.38%, while the S&P 500 gained 0.36% and the tech-heavy Nasdaq Composite overperformed, gaining 0.83%.

Traders are looking at the electoral results to react on Wednesday, with some sectors being particularly exposed to political developments.

Artificial intelligence stocks have come under pressure, while questions about regulation, government spending and the conflict with Iran threaten to complicate the market's historically strong performance after midterms.

The election could prove particularly consequential for companies tied to AI infrastructure. Investors are watching whether Democratic gains would strengthen efforts to restrict data centers or reconsider incentives supporting their construction.

Texas, a major center for the expansion, is an important test. Marcus said an unexpected defeat for Republican Gov. Greg Abbott could unsettle investors concerned about the industry's political support.

Goldman Sachs strategists, however, see limits to the potential disruption. They believe a Democratic Congress could curb data center tax incentives, while a nationwide moratorium remains unlikely under any election outcome.

Health care could move in the opposite direction. Investors anticipate Democrats would seek to restore enhanced Affordable Care Act premium subsidies and revisit Medicaid changes enacted under Republicans. Those priorities could improve expectations for hospitals and health insurers, although passing legislation would still require navigating the White House.

Beyond individual sectors, investors must weigh whether the usual post-election rally will materialize. The S&P 500 finished higher one year after every midterm election from 1982 through 2022, according to CNBC's historical analysis.

In the geopolitical sphere, U.S.-Iran negotiations appeared to hit a snag after Mohsen Rezaei, secretary of Iran's Supreme National Security Council, said that Washington's latest response to the proposal to cease hostilities was "not convincing."

"They must fully and explicitly address Iran's seven conditions and act upon them; only in this case will the Strait of Hormuz be reopened," Rezaei said in a social media publication.

The remarks come shortly after an Iranian official also said a deal with the U.S. is still elusive. Speaking at a news briefing, the official, who remained anonymous, said "mediators are working hard to narrow gaps between Tehran and Washington." However, he noted that "Tehran's conditions must be met if the U.S. wants Hormuz reopened."

The official went on to claim that nuclear talks will only start after Iran's conditions are met and it won't accept Washington's current demands, which were labeled as "excessive."

The remarks stand in contrast with those of JD Vance, who told CNN "the president and I both feel really good about the prospect of potentially coming to a negotiated settlement."

President Donald Trump, on his end, noted on Monday that prices were dropping on hopes of a deal. "Iran wants a settlement, as soon as possible. It could happen!" he added.

The president also told Axios earlier on Monday that he's in "no rush" to decide whether to resume full-fledged attacks against Iran. "One way or the other, we will do something, but there is no rush. We crippled them financially. They have no money, no gasoline and their people are getting very tired of it," Trump told the outlet.