Stock Market Pushes Higher After Election

The Washington Post
Thursday, November 08, 2018

The Dow Jones industrials like a divided government — so far. The blue-chip index closed on Wednesday up 545 points after Democrats took back the House in last night’s midterms and Republicans strengthened their hold on the Senate.

It’s the Dow’s sixth up day in seven sessions, gaining 545 points, or 2.13 percent, to hit 26,180 by the end of trading. Caterpillar, UnitedHealth, Pfizer and Microsoft all spearheaded the rise among the Dow 30 blue chips. Proctor & Gamble was the only company in the red.

The Standard & Poor’s 500-stock and the Nasdaq composite followed with increases of 2.1 percent and 2.6 percent respectively in noontime trading.

Oil prices dropped again, in their sixth down session in a row.

“With the conclusion of this year’s midterm elections, the cloud of uncertainty has been lifted, allowing stocks to resume their recovery from the October sell-off,” said Sam Stovall, chief of U.S. equity strategy at CFRA.

The split decision of Democratic House and Republican Senate puts the kibosh on any tax cut that President Donald Trump was proposing for the second half of his term.

Goldman Sachs on Wednesday said it does not expect any tax legislation over the next two years.

“Having gotten tax cuts, spending increases and deregulation in the past two years, the market is glad to take two years of stasis now,” said Ed Keon, chief investment strategist at QMA.

Michael Farr, a Washington investor, said he expects tempests between Trump and House Democratic leader Nancy Pelosi.

“Nancy and Maxine Waters should circle the wagons daily,” Farr said. “I think we go back to a no-budget world of continuing resolutions and threats of government shut downs.”

He expects that House Democrats will not be friendly to the financial sector.

“Waters as new chair of the House Financial Services Committee is no friend to Wall Street,” Farr said. “Those companies will have to watch their backs.

Looking ahead, the one place Trump and Democrats may find common ground is infrastructure. Both sides have shown willingness to pass legislation on that, as it reaches into every corner of the country and gives both parties something to brag about.

Construction, materials and industrial stocks could benefit from a big infrastructure program that includes ports, airports, roads and bridges. That would be good for growth, but not good for the federal deficit as it would require the government to borrow more money. Investors also like Democrats as a check on Trump trade policies.