US equities swung sharply on the same election outcome, with the Dow posting its best session since April 2025 on Wednesday before sliding towards its worst day since that month on Thursday. The index traded just above 51,500, below Tuesday’s close and at its lowest since 14 October, with 29 of 30 constituents lower and Coca-Cola (KO) the lone exception. Selling that began in chipmakers broadened out: the Nasdaq Composite sat more than 10% below its October record, chip stocks were on track for their worst session since March 2020, and the Cboe Volatility Index (VIX) touched 28, its highest since 31 March. Moves in the Dow were amplified by price-weighting, with Goldman Sachs (GS) near $870 a share representing about a tenth of the index; its roughly 6% drop accounted for around a fifth of points lost, while Nvidia (NVDA) near $180 was about 2% of the Dow and its 9% fall drove about 6% of the decline. Caterpillar (CAT) also weighed after reporting, on 29 October, a 30% rise in power generation sales to $3.42bn in Q3, tied to data-centre demand; five large US technology names in the Dow together made up less than a fifth of the drop, with the rest spread across banks, industrials and healthcare.
Policy risk around data centres and bank capital added pressure. An AI Data Center Moratorium Act was introduced on 25 March, and lawmakers in at least 11 states had proposed pauses; Tuesday’s ballots included more than 40 local data-centre measures, with restrictions backed in nearly all cases, while Democrats won Senate and governor races in both Texas and Ohio where buildout is concentrated. Fitch warned planned capacity may face regulatory hurdles in Texas, Georgia and Ohio, and UBS estimated construction pauses could put about 30% of capacity planned for 2028 at risk; Alphabet (GOOGL) announced a $17bn Wyoming data centre during the session but fell with the market. Banks faced added scrutiny as the Senate Banking Committee is expected to pass to Senator Elizabeth Warren in January; she has asked regulators to withdraw three bank capital proposals, while JPMorgan (JPM) was down about 4%, and price-weighting puts JPMorgan and Goldman near 14% of the Dow versus about 2% of the S&P 500. Macro data drew little reaction: initial jobless claims fell to 189K for the week to 31 October versus 196K forecast, productivity rose 3.6% against 2.5% expected, and unit labour costs fell 0.7%, the first decline since Q2 2025, yet the 10-year Treasury yield eased to about 4.85%; the Fed held at 3.75%-4.00% on 28 October and futures implied close to 80% odds of a hike on 9 December. October payrolls are due Friday at 13:30 GMT, forecast at 65K after 29K, with unemployment seen at 4.2% and average hourly earnings at 0.3% MoM; technical levels cited include a 50-day EMA near 52,150, support around 51,500 then 51,400, and downside references to early-October lows near 51,000 and a 200-day EMA near 50,800, last traded on 7 April.
Dow Jones Trading Bias and Volatility
We should lean short on the Dow Jones Industrial Average while its price stays capped below the 50-day Exponential Moving Average around 52,150. The sharp post-election reversal and a surging Cboe Volatility Index above 28 show that the initial rally was built on fragile ground. Historically, when the VIX spikes past 25 following political shifts, equity indices often experience multi-week pullbacks before finding a firm floor.
We need to pay close attention to heavy price-weighted heavyweights like Goldman Sachs and Caterpillar, which are dragging the index down disproportionately. Financial stocks face renewed regulatory risks with shifting leadership in the Senate Banking Committee, where tighter capital requirements could constrain bank balance sheets. Historically, proposed bank capital increases have trimmed sector earnings multiples by 5% to 10%, giving us little reason to buy bank dips right now.
Risks From Policy and Macroeconomic Pressures
The political backlash against the data-center expansion directly threatens major industrial and tech members. With UBS estimating that up to 30% of planned 2028 capacity could face delays from local and federal restrictions, capital expenditure forecasts are being slashed. We should keep our short targets focused first on the early-October support near 51,000, followed by the 200-day EMA near 50,800.
Macroeconomic pressures from high interest rates will continue to cap any short-term relief rallies. With 10-year Treasury yields sitting high at around 4.85% and the Fed pricing in potential rate hikes, higher borrowing costs make expensive buildouts even harder to fund. If a daily candle closes back above the 52,150 level, we should immediately exit short positions and reassess the market bias.
