Stock futures rise on hope Republicans performing better than expected in midterms

Finance


Mark Wilson | Getty Images News | Getty Images

The U.S. Capitol is shown on October 5, 2018 in Washington, DC. Later today the U.S. Senate will proceed with a cloture vote for Supreme Court Justice nominee Brett Kavanaugh which could could pave the way for a final vote on his confirmation to the high court as early as Saturday. (Photo by Mark Wilson/Getty Images)

U.S. stock futures traded in a wide range on Tuesday night as results of a widely anticipated midterm election started to trickle in.

Dow Jones Industrial Average futures rose 57 points after briefly falling about 100 points. Dow futures also traded more than 100 points higher earlier. S&P 500 and Nasdaq 100 also traded higher after slipping earlier in the evening. They opened for trading at 6 p.m. ET.

“These are early results, but markets are extrapolating a much higher probability that Republicans keep the House and they can make big gains in the Senate,” said Dan Clifton, head of policy research at Strategas Research. “The caution is this is early and it could change.”

Futures fell as Democrats took their first seat back in the House. Virginia state Sen. Jennifer Wexton defeated Republican Rep. Barbara Comstock, according to NBC News. Democrat Donna Shalala will also flip a seat held by the GOP, NBC News said. Democrats currently need to flip 21 more seats to retake control of the House.

Stock futures then rebounded as more results started to come in. It was still too early for NBC News to call many of the races. Futures seem to be responding to changes in the forecasts by FiveThiryEight, which now show about even odds that Democrats would take back the House, far worse odds for the party than were shown earlier on the site.

NBC News also said Republican Andy Barr won his race in Kentucky in what seems like a missed opportunity for the Democrats.

Equities in the U.S. closed higher on Tuesday as the elections began earlier in the day.

While pollsters and election experts expect the Democrats to take control of the House and Republicans to keep a slim majority in the Senate, stock investors are still holding out hope that Republicans and their pro-business policies will perform better than expected.

If Republicans outperform expectations, “we’d think it would be bullish in the near term, with potentially tax reform 2.0. We think it could potentially be a little better for the economy in the near term, but it’d be nothing really new,” said Ryan Detrick, senior market strategist at LPL Financial.

The other two possible outcomes are the GOP maintaining control over the two chambers and the Democrats sweeping both the House and Senate.

The outcome of these elections has massive implications for investors as it will influence which policy initiatives Congress will pursue or will block. Some of the key areas that will be affected by these outcomes include drug pricing and banking regulation.



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