U.S. Stocks Climb Ahead of Election Results

Date : 11/06/2018 @ 10:18PM
Source : Dow Jones News
Stock : Cloud Peak Energy Inc. (CLDPQ)
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U.S. Stocks Climb Ahead of Election Results

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By David Hodari and Corrie Driebusch 

U.S. stocks rose Tuesday as investors awaited the results of midterm elections that could change control of Congress and put a brake on much of the White House's agenda for the next two years.

Although the stock market remained fairly quiet, some corners were busier as traders placed bets on how the election could reshape the legislative branch of the U.S. government.

Gun makers, whose shares tend to jump along with gun sales when Democrats win office, rose sharply on fears that lawmakers could pass firearm legislation. Sturm Ruger gained $2.10, or 3.7%, to $58.36, American Outdoor Brands added 61 cents, or 4.7%, to 13.70, and Vista Outdoor rose 29 cents, or 2.1%, to 14.00.

Meanwhile, shares of some coal companies, which have risen as President Trump has repeatedly promised to support the industry and roll back restrictions, declined. Arch Coal's stock slumped 1.15, or 1.2%, to 93.90 and Cloud Peak Energy fell 7 cents, or 3.8%, to 1.77.

The Dow Jones Industrial Average added 173.31 points, or 0.7%, to 25635.01. The S&P 500 added 17.14, or 0.6%, to 2755.45 and the Nasdaq Composite gained 47.11, or 0.6%, to 7375.96.

Stocks have been pushing higher in recent days, a slight bounceback after a punishing October. Concerns about the longevity of global economic growth and jitters about riskier stocks led to the worst month for major stock indexes in years.

That downturn helps set stocks up for gains following the U.S. midterm elections, some analysts say.

"Whatever the result, the markets are likely to rally," said Julian Emanuel, chief equity and derivatives strategist at BTIG, adding he believes investors will cheer the end of a bitter campaign. He also had a warning for investors headed into election night: Don't make any knee-jerk investment decisions based on voting results.

"You tend to think you can gauge what the market reaction will be, but remember 2016," he said. The night of the 2016 presidential election, stock futures tumbled as President Trump's victory became clear. By Wednesday morning, however, U.S. stocks bounced back and ended up closing the day sharply higher.

In the final pre-midterm election Wall Street Journal/NBC News poll released Sunday, Democrats held a seven-percentage-point lead on the question of which party should control the next Congress.

With the Republican party currently controlling the House of Representatives, the Senate and the White House, the Democrats capturing either chamber of Congress would raise the risk of legislative gridlock, making it more difficult for President Trump to pass his agenda unimpeded.

Unless the vote produces a shock result, however, the policy outlook for market participants is currently positive, according to Brian Jacobsen, a senior investment strategist at Wells Fargo Asset Management.

"We already have tax cuts, there may be some bipartisan support for an infrastructure bill, but the situation isn't currently too bad for investors," he said.

Cyclical stocks such as banks may rally in the event the Republicans keep control of the House, but if the branches of U.S. government become split between the Democrats and Republicans, "that makes a strong argument for continuing to be diversified and broadly favoring value over growth with a tilt toward defensive stocks," Mr. Jacobsen said.

The cautious mood in stocks was mirrored in Europe, where the Stoxx Europe 600 slipped 0.3%.

Trading was more mixed in Asia. While the Japanese Nikkei Stock Average rose 1.1%, partly buoyed by its banks, China's Shanghai Composite Index lost 0.2%.

Write to David Hodari at David.Hodari@dowjones.com and Corrie Driebusch at corrie.driebusch@wsj.com


(END) Dow Jones Newswires

November 06, 2018 17:03 ET (22:03 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.

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