Tech, health care lead post-midterm stock surge

Pawtucket Times - - VALLEY/NATION -

NEW YORK (AP) — Stocks ral­lied Wed­nes­day as in­vestors were re­lieved to see that the U.S. midterm elec­tions went largely as they ex­pected they would. Big-name tech­nol­ogy and con­sumer and health care com­pa­nies soared as the S&P 500 in­dex closed at its high­est level in four weeks.

Democrats won con­trol of the House of Rep­re­sen­ta­tives while Repub­li­cans kept a ma­jor­ity in the Se­nate, as most polls had sug­gested. It’s not clear how the di­vided Congress will work with Repub­li­can Pres­i­dent Don­ald Trump, but if the pos­si­bil­i­ties for com­pro­mise and big agenda items seem lim­ited, Wall Street is fine with that be­cause it means pol­i­tics is that much less likely to crowd out the per­for­mance of the strong U.S. econ­omy.

“The mar­ket likes when what it ex­pects to hap­pen hap­pens,” said JJ Ki­na­han, chief mar­kets strate­gist for TD Amer­i­trade. “We haven’t had that hap­pen in a lit­tle while, when you think about ma­jor events like Brexit or the pres­i­den­tial elec­tion.”

The S&P 500 in­dex climbed 58.44 points, or 2.1 per­cent, to 2,813.89. The in­dex has risen six out of the last seven days to re­cover most of the losses it suf­fered in Oc­to­ber.

The Dow Jones In­dus­trial Aver­age rose 545.29 points, or 2.1 per­cent, o 26,180.30. The Nas­daq com­pos­ite climbed 194.79 points, or 2.6 per­cent, to 7,570.75. The Rus­sell 2000 in­dex of smaller-com­pany stocks added 26.06 points, or 1.7 per­cent, to 1,582.16. Three-fourths of the stocks on the New York Stock Ex­change traded higher.

His­tor­i­cally mar­kets have per­formed well af­ter midterm elec­tions and with split con­trol of Congress.

Stocks are off to a strong start in Novem­ber, and the S&P 500 is up 3.8 per­cent so far this month. That fol­lows a swoon in Oc­to­ber that knocked the S&P 500 down nearly 7 per­cent as in­vestors wor­ried about ris­ing in­ter­est rates and the U.S.-China trade dis­pute.

High-growth stocks took an es­pe­cially bru­tal beat­ing last month. Quincy Krosby, chief mar­ket strate­gist at Pru­den­tial Fi­nan­cial, said it will be worth watch­ing to see if in­vestors are will­ing to buy those stocks again or if they con­tinue to pre­fer slower-grow­ing, more “de­fen­sive” com­pa­nies like util­i­ties and house­hold goods mak­ers.

On Wed­nes­day in­vestors bet on growth. Ama­zon jumped 6.9 per­cent to $1,755.49 and Mi­crosoft gained 3.9 per­cent to $111.96, while Google’s par­ent com­pany, Al­pha­bet, picked up 3.6 per­cent to $1,108.24.

Steady, “de­fen­sive” stocks lagged the rest of the stock mar­ket. Those com­pa­nies, which in­clude util­i­ties and house­hold goods mak­ers, tend to do well when stocks are in tur­moil, but they’re less ap­peal­ing when in­vestors are bet­ting on eco­nomic growth.

In­dus­trial com­pa­nies made strong gains, but they didn’t do as well as the rest of the mar­ket. While some in­vestors hope that Trump and Con­gres­sional lead­er­ship will pass an in­fra­struc­ture stim­u­lus bill, they’ve had those hopes dashed more than once since he took of­fice.

It’s not clear how the elec­tions will af­fect the Trump pol­icy Wall Street might be most con­cerned about: the trade dis­pute with China. Trump has im­posed taxes of up to 25 per­cent on $250 bil­lion of Chi­nese im­ports and threat­ened ad­di­tional tar­iffs on top of those. Bei­jing has re­sponded with tar­iffs on $110 bil­lion of Amer­i­can goods.

A pri­mary con­cern in Asia is the po­ten­tial for trade ten­sions to hob­ble growth for ex­port-re­liant economies.

Economists at S&P Global, Ox­ford Eco­nom­ics and the Bank of Amer­ica all agreed that govern­ment grid­lock will likely re­sult from the Democrats win­ning con­trol of the House. But they don’t think a stale­mate will au­to­mat­i­cally hin­der eco­nomic growth.

It’s more likely that govern­ment will play less of a role in spurring eco­nomic growth in 2019 and 2020. As a re­sult, the health of the global econ­omy, in­ter­est rates set by the Fed­eral Re­serve, and spend­ing by U.S. con­sumers and com­pa­nies will have a big­ger im­pact on de­ter­min­ing the pace of growth.

The Fed­eral Re­serve is also meet­ing Wed­nes­day and Thurs­day. It’s not ex­pected to raise in­ter­est rates this month, but in­vestors be­lieve it will do so in De­cem­ber.

Banks also didn’t rise as much other stocks. Repub­li­cans had dis­cussed a new round of tax cuts if they main­tained full con­trol over Congress, which would have ex­panded the govern­ment’s deficits fur­ther and re­quired it to is­sue more debt. Govern­ment bond yields spiked overnight af­ter a batch of strong early re­sults for some GOP can­di­dates, but then headed lower as Democrats’ for­tunes im­proved, mak­ing a new tax cut pack­age un­likely.

Democrats’ vic­tory in the House also means that Rep. Max­ine Wa­ters will likely be­come chair­woman of the House Fi­nan­cial Ser­vices Com­mit­tee, which over­sees the na­tion’s bank­ing sys­tem and its reg­u­la­tors. Wa­ters has called for more reg­u­la­tion of banks, and has been vo­cal about Trump po­lit­i­cal ap­pointees mov­ing to roll back reg­u­la­tions on banks and other fi­nan­cial ser­vices com­pa­nies.

The yield on the 10-year Trea­sury note rose slightly, to 3.22 per­cent. It spiked as high as 3.25 per­cent Tues­day night.

The U.S. dol­lar also weak­ened. The ICE US dol­lar in­dex fell 0.2 per­cent. The U.S. cur­rency fell to 113.34 yen from 113.40 yen, and the euro climbed to $1.1455 from $1.1413.

Ma­jor in­dexes in Europe climbed. The French CAC 40 jumped 1.2 per­cent, while Bri­tain’s FTSE 100 gained 1.1 per­cent. The DAX in Ger­many rose 0.8 per­cent.

Oc­to­ber is his­tor­i­cally a rough month for stocks, though mar­kets usu­ally rise af­ter midterm elec­tions re­gard­less of how the po­lit­i­cal land­scape may change be­cause Wall Street is glad to have more cer­tainty.

Democrats’ win in the House means Repub­li­cans won’t be able to take an­other shot at re­peal­ing the 2010 Af­ford­able Care Act, which ex­tended health in­sur­ance cover­age to mil­lions of Amer­i­cans. Vot­ers in Idaho and Ne­braska all voted to ex­pand Med­i­caid, and the win­ning gu­ber­na­to­rial can­di­dates in Maine and Kansas also fa­vor ex­pand­ing Med­i­caid ben­e­fits. Vot­ing on a Med­i­caid ex­pan­sion propo­si­tion in Utah was too close to call.

Health in­sur­ers, hospi­tal op­er­a­tors and Med­i­caid pro­gram op­er­a­tors all jumped. Unit­edHealth gained 4.2 per­cent to $274.63 and hospi­tal com­pany HCA added 4.7 per­cent to $141.65. Molina, a provider of Med­i­caid-re­lated ser­vices, surged 10.5 per­cent to $137.32.

Mar­i­juana stocks jumped af­ter Michi­gan voted to le­gal­ize recre­ational mar­i­juana and Utah and Mis­souri vot­ers ap­proved med­i­cal mar­i­juana mea­sures. The stocks rose even fur­ther af­ter the res­ig­na­tion of At­tor­ney Gen­eral Jeff Ses­sions, who pro­moted more ag­gres­sive en­force­ment of those laws. Til­ray vaulted 30.6 per­cent to $139.60 and Canopy Growth rose 8.2 per­cent to $46.07.

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