Stocks rally in wake of voting
U.S. equities jumped as investors moved past the hurdle of uncertainty presented by the midterm elections and embraced an outlook for Washington gridlock.
Riskier assets were in favor after Democrats won control of the House of Representatives and Republicans held the Senate. The outcome dims chances that Donald Trump’s signature tax cuts will be reversed, but also makes less likely major fiscal initiatives that might have pushed up interest rates. The dollar slid and Treasuries climbed.
Tech stocks, which absorbed the brunt of October’s sell-off, led gains as the Nasdaq 100 surged more than 3 percent. Amazon.com and Netflix were among the best performers. Health care shares rallied as investors saw reduced risk for major changes to the health system, while marijuana stocks gained after Michigan voted to permit recreational use and Attorney General Jeff Sessions — a critic of legalization — resigned. A gauge of volatility expectations declined.
“We’ve gotten the broad uncertainty out of the way,” said Chad Morganlander, senior portfolio manager at Washington Crossing Advisors.
The outcome largely matched polling going into the vote, and it’s likely investors will now refocus their attention on other issues. The biggest macro theme remains the trade war after recent warnings from major names including the IMF’s Christine Lagarde and former U.S. Treasury Secretary Hank Paulson. Meanwhile, the Federal Reserve is set to decide interest rates Thursday, and Theresa May is pushing on with efforts on a Brexit deal.
Elsewhere, European stocks rallied and Asian shares were mixed. Shares of Spanish banks surged after they escaped paying billions of euros in back taxes. The euro rallied as data showed German industrial output picked up steam in September.
The S&P 500 Index rose 2.1 percent as of the close of trading in New York; the Nasdaq Composite added 2.6 percent; the Dow Jones Industrial Average rose 2.1 percent.