2026-11-05

Lockheed Martin Drops 6.9%, First Solar Jumps Up to 9% - How the Democratic Sweep Split Wall Street Into Winners and Losers

Written & reviewed by the TradeSmrt editorial team · 2026-11-05

In this article

What Happened
The Logic Behind Each Move
What to Take Away From This
FAQ
Sources

What Happened

The headline from Wednesday, November 4 was simple: the Dow Jones Industrial Average surged 1,307 points, or roughly 3%, its best day since April, after Democrats won control of both the House and Senate in the midterm elections. But that single index number hid a much more interesting story underneath. While the broad market rallied as political uncertainty lifted, individual sectors split sharply into clear winners and losers, and the pattern of who won and who lost tells you exactly what Wall Street thinks a Democratic Congress will and won't be able to do over the next two years.

On the losing side, defense contractors took the hardest hit. According to CNBC's closing figures, Lockheed Martin tumbled 6.9%, Northrop Grumman sank 4.5%, Howmet Aerospace fell 4.3%, and RTX slipped 2.4%. Reuters put L3Harris down roughly 7% and General Dynamics off about 2.5% in the same session. The entire group had rallied hard through October on strong earnings and record order backlogs, which made the reversal even sharper. Right alongside defense, the "neocloud" AI infrastructure names - companies that build and rent out the data centers powering the AI boom - also got hit. CoreWeave fell 10%, Iren dropped 6%, and Nebius slipped about 5%, while Nvidia itself eased just over 1%.

On the winning side, solar and clean-energy names jumped. First Solar climbed between roughly 4.6% and 9% depending on the source and time of day, Enphase Energy surged as much as 9%, Sunrun rose 6-7%, SolarEdge advanced 3-6%, and Canadian Solar gained 6.7%. Health insurers did even better: Centene jumped 12.6%, Molina Healthcare rose 8.9%, and hospital operator HCA Healthcare climbed as much as 10.3%. And in a twist that looks contradictory at first glance, mega-cap tech also rallied hard even as the smaller AI infrastructure plays fell - Amazon surged 8%, Apple climbed nearly 7%, Google rose over 6%, and Microsoft gained 4%.

The Logic Behind Each Move

Every one of these moves is a bet on what a Democratic Congress can realistically do, and the common thread connecting all of them is the presidential veto. Democrats will control both chambers starting in January, but President Trump still holds veto power, which caps how much binding policy change is actually possible. That constraint matters because it explains why some sectors overreacted more than others.

Defense stocks fell because investors expect a Democratic Congress to scrutinize the administration's proposed Pentagon budget increase - reportedly north of $500 billion - more closely, potentially trimming it, slowing new program starts, or forcing the government onto temporary continuing resolutions that make long-term contracting harder. But context matters here. Wolfe Research analyst Myles Walton pointed to 2006 as a precedent: when Democrats took Congress that year, defense stocks initially fell about 2% and then recovered within months, because military budgets kept climbing anyway even under divided government. Existing contracts don't get torn up overnight, and defense spending has historically proven far stickier than election-night selling implies. That history suggests at least part of Wednesday's defense selloff may be a knee-jerk overreaction to a headline risk that takes years, not weeks, to materialize into an actual budget cut.

Solar and clean-energy stocks rallied on the opposite bet: that a Democratic Congress will push to restore or extend clean-energy tax credits the current administration has been rolling back, and will resist further permit rejections for renewable projects. Health insurers rallied on a similarly specific policy theory - that Democrats will fight harder to extend the enhanced Affordable Care Act premium subsidies that are otherwise set to expire, a live issue that had already been tangled up in the recent government shutdown fight. Both moves are pricing in legislative intent, not an enacted law; none of this becomes real unless it survives committee negotiations and, eventually, a signature or an override vote Democrats don't have the numbers for.

The hyperscaler-versus-neocloud split is the most mechanically interesting piece of the puzzle. Amazon, Google, Microsoft, Meta, and Apple all rallied, while CoreWeave, Iren, and Nebius - companies whose entire business model is renting out AI computing capacity to those same hyperscalers - fell hard. The logic is that increased regulatory friction or political scrutiny around AI capital spending could, at the margin, slow the breakneck pace of data-center buildout. For the hyperscalers themselves, who fund that buildout out of their own enormous free cash flow, slower capex growth could mean better near-term margins and less balance-sheet strain. But for the neocloud operators, whose revenue exists only because hyperscalers keep ordering more capacity, any slowdown in that spending cuts directly into their growth story. The same piece of political news produced opposite stock reactions depending on which side of the AI capex relationship a company sits on.

Worth noting: CNBC's Jim Cramer cautioned on the same day that investors may be reading too much into the rally and the rotation beneath it, since actual legislation is still a long way from any of these sectors' trading desks.

What to Take Away From This

Sector rotations on election news are bets on probability, not enacted fact. Nothing described above is law yet. A Democratic Congress still has to negotiate committees, write bills, and get a signature or override a veto Democrats don't currently have the votes for. Treat these moves as the market pricing in a changed probability distribution, not a locked-in outcome.
Check the historical base rate before assuming a sector move will stick. Wolfe Research's point about defense stocks falling roughly 2% in 2006 and then recovering as budgets kept rising anyway is a useful reminder that initial reactions to political headlines often overshoot, especially for spending that's locked in by existing multi-year contracts.
Understand who sits where in a supply chain before assuming a sector reacts uniformly. Hyperscalers and the neocloud operators that depend on hyperscaler spending are both "AI stocks" in a loose sense, but they sit on opposite sides of the same capex relationship - which is exactly why one group rallied while the other sank on identical news.
A credible skeptic's voice is a useful check. When even a bullish commentator like Jim Cramer flags that a rally and its underlying rotation might be overdone, it's worth separating the durable policy logic from the one-day positioning trade before acting on either side of it.

FAQ

Why would defense stocks fall if Congress rarely cancels existing military contracts?

Existing, already-signed contracts are largely insulated from a change in Congress, which is exactly why history (like the 2006 midterms) shows defense stocks recovering relatively quickly after an initial selloff. What markets are actually pricing in on days like November 4 is the risk to future budget increases and new program starts, which are easier for a divided government to slow down or trim than it is to unwind money already committed.

If AI spending risk is rising, why did Big Tech stocks go up instead of down?

Because Amazon, Microsoft, Google, Meta, and Apple fund their own AI data-center buildout out of existing cash flow, a slower pace of spending growth can actually improve their near-term margins. The companies that get hurt by slower AI capex growth are the ones whose revenue depends entirely on that spending continuing to accelerate - mainly the neocloud operators like CoreWeave, Iren, and Nebius, which rent out AI infrastructure capacity to the hyperscalers rather than funding their own balance sheets.

Can President Trump block all of this with a veto anyway?

Largely, yes, for anything requiring new legislation - a divided government with a Republican in the White House and a presidential veto in place caps how much binding policy change either party can force through. That's exactly why analysts describe most of these sector moves as the market repricing probability and sentiment rather than locking in a guaranteed future outcome.

Sources

This article is an independent synthesis and analysis based on the reporting below, not a reproduction of the original articles. Please check the original sources directly for the most current figures.

⚠️ This article is for informational purposes only and is not investment advice. Market conditions change constantly, so always verify the latest data before making investment decisions.