U.S. Stocks Climb as Voters Head to the Polls
November 06 2018 - 3:03PM
Dow Jones News
By David Hodari and Corrie Driebusch
U.S. stocks climbed 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 at midafternoon,
some corners were busier as traders placed bets on how the election
may 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 3.1%, American Outdoor
Brands added 5.4% and Vista Outdoor rose 2.1%.
Meanwhile, shares of some coal companies, which have jumped
since 2016 as President Trump has repeatedly promised to support
the industry and roll back restrictions, dropped. Arch Coal's stock
slumped 1.4% and Cloud Peak Energy declined 2.7%.
The S&P 500 and the Dow Jones Industrial Average added about
0.5%. The Nasdaq Composite gained 0.6%.
Technology shares were among the biggest gainers Tuesday, with
Apple shares up 0.7%. Even with the gains, the company's shares are
off 8.6% since reporting disappointing fourth-quarter guidance
Thursday after the market closed.
Apple's recent losses extended the selloff in tech stocks that
punished investors in October and signaled broader market concerns
about the longevity of global economic growth and jitters about
riskier stocks.
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 and Shenzhen A-Share lost 0.2% and 0.4%,
respectively.
Write to David Hodari at David.Hodari@dowjones.com and Corrie
Driebusch at corrie.driebusch@wsj.com
(END) Dow Jones Newswires
November 06, 2018 14:48 ET (19:48 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.