Markets cool after monster midterm rally, Musk stocks under pressure

Hello, Leonie Kidd here with today’s edition of Morning Squawk.

Tempers are calmer after the monster rally that led to the best day for the Dow Jones in more than a year and a half.

Investors are now weighing the impact of a new Democratic-controlled Congress and how it will change the market landscape.

Futures are mixed on Wall Street after the Dow closed its best day since April 2025, climbing more than 1,500 points on Democrats’ decisive midterm victory.

The fall in oil prices has given stocks a big boost. Brent and WTI stabilized lower after falling more than 8% during Wednesday’s session. This came as the Trump administration admitted the role the war in Iran played in poor Republican results.

This is a mixed transfer of power from Asia, where Japan Nikkei and South Korea Kospi fell sharply in a context of increasing technological disruption, despite the strength of the entire market. European stock markets are generally on the rise.

President Donald Trump told CNBC’s Eamon Javers in a brief call Wednesday that he can work with Democratic majorities in the next Congress on “a lot more things than people understand.”

• Analysis: Analysts spoke to CNBC about the drivers of the monster rally, with Generali’s Thomas Hempell saying Trump’s openness to collaboration shows “more negative polarization can be avoided.”
• Relief gathering: Deutsche Bank’s George Saravelos said Trump’s acceptance of the results “would act as a brake on extreme policy outcomes and drive down risk premiums.”
• Future : We get the Federal Reserve’s perspective when CNBC’s Steve Liesman speaks with Richmond Fed President Tom Barkin at 9 a.m. ET. He has previously said consumers are “exhausted and frustrated” by high prices.

The pressure is still on Elon Musk’s companies.

Tesla And EspaceX are down again in pre-market trading, after falling more than 3% during yesterday’s session.

• Why it’s important: Selling pressure focused on Musk’s companies after his $474 million investment. failed election bet. Musk now has fewer allies in Congress and more obstacles in Texas.
• The billionaires’ point of view: CNBC’s Luke Fountain reports how Wall Street billionaires react to the result, with Virgin’s Richard Branson and LinkedIn co-founder Reid Hoffman calling for money to get out of politics, while Elon Musk joked about his “election-interfering space lasers” failing.

One of the most significant early declines is Qualcomm. Shares fell more than 9% in premarket trading after fourth-quarter smartphone chip sales missed estimates.

• Analysis: Seaport analyst Jay Goldberg said Qualcomm’s data center business was barely compensating the loss of his smartphones.
• Price targets: JPMorgan, Morgan Stanley and TD Cowen all cut their price target for the stock to between $185 and $200 per share.
• Future : CNBC speaks today at 12:20 p.m. ET with Qualcomm CEO Cristiano Amon after telling investors, “We don’t have a demand problem.”

Cryptocurrencies are cautiously higher overnight as investors gauge how much the new Democratic makeup of Congress will impact Washington’s view.

Bitcoin is hovering around the $80,000 mark, expanding the broader crypto space.

• Why it matters: CNBC’s Tayana Macheel will examine how the midterm results could reset the political calculus for crypto, paving the way for a more adversarial approach and pushing industry-friendly legislation like the CLARITY Act to the back burner.
• And then? : Experts told CNBC’s Make It that they should I don’t expect an immediate changeasserting that “platforms will continue to offer the products they do today, and they still have friendly regulators at the SEC and CFTC who approve an ever-widening range of crypto products.”

Analysis: Democrats have a chance to extract concessions from Trump

The Democrats’ election victory Tuesday night injects new, volatile dynamics into the biggest political risk to financial markets in the year ahead: the debt ceiling. Unless a defeated Republican Party makes a quick and unlikely show of unity to take the issue off the table in its final weeks in office, the protracted fight that will unfold looks more bitter than ever, adding volatility to an already fragile bond market.

— CNBC’s Sean Conlon, Spencer Kimball, Pippa Stevens, Luke Fountain, Matt Peterson and Mike Winters contributed to this report.

Jack Sommers edited this edition.