WS #16845

The US midterm elections have delivered a decisive Democratic sweep of Congress, triggering a broad-based 'gridlock rally' that has lifted European bank stocks and US futures. This political resolution is dampening the escalation premium in the Middle East, evidenced by a sharp rally in Ukraine's dollar bonds as markets price in improved US-Kyiv relations. However, the geopolitical narrative remains fragile; Trump has admitted the Iran war hurt Republican votes, and Iranian celebrations suggest underlying volatility, while the prevailing Middle East tension thesis remains committed to escalation until a formal de-escalation signal emerges. In corporate markets, the focus is sharply divided between earnings beats and guidance misses. Uber delivered a solid Q3 beat on margin expansion, while McDonald's posted strong EPS growth. Conversely, the tech sector is facing a 'guidance > quarter' reality check: Datadog plummeted 18% on a weak Q4 outlook, and Doximity fell 38% on a weak FY27 guide. This divergence highlights that while top-line growth is present, investors are aggressively selling names that cannot justify premium multiples with forward visibility. Energy and industrial sectors are seeing mixed signals. WTI crude remains elevated near $96 with widening refining margins, supporting energy stocks but pressuring airlines and consumer discretionary. Meanwhile, the solar sector is consolidating via an all-stock merger between Array and Shoals Technologies, and Peabody Energy reported a narrower loss but missed EPS, reflecting the complex interplay between commodity prices and operational costs.