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Wednesday November 14th, 2018 2:31AM

US stocks surge after midterms; tech and health care jump

By The Associated Press
  Contact Editor

NEW YORK (AP) — Stock and bond prices are climbing Wednesday after the U.S. midterm elections generally went the way investors expected they would. Big-name technology and consumer companies are making some of the largest gains.

Democrats won control of the House of Representatives while Republicans kept a majority in the Senate, as most polls had suggested. It's not clear how the divided Congress will work with Republican President Donald Trump, but if the possibilities for compromise and big agenda items seem limited, Wall Street is fine with that because it means politics is that much less likely to crowd out the performance of the strong U.S. economy.

"The market likes when what it expects to happen happens," said JJ Kinahan, chief markets strategist for TD Ameritrade. "We haven't had that happen in a little while, when you think about major events like Brexit or the presidential election."

The S&P 500 index gained 49 points, or 1.8 percent, to 2,805 as of 3 p.m. Eastern time. The S&P 500 is on track for its highest close in three weeks.

The Dow Jones Industrial Average rose 460 points, or 1.8 percent, to 26,095. The Nasdaq composite climbed 163 points, or 2.2 percent, to 7,539. The Russell 2000 index of smaller-company stocks added 20 points, or 1.3 percent, to 1,576. Three-fourths of the stocks on the New York Stock Exchange traded higher.

Historically markets have performed well after midterm elections and with split control of Congress.

High-growth stocks were pummeled during the market's drop last month. Quincy Krosby, chief market strategist at Prudential Financial, said it will be worth watching to see if investors are willing to buy those stocks again or if they continue to prefer slower-growing, more "defensive" companies like utilities and household goods makers.

Technology and consumer-focused stocks headed higher Wednesday. Amazon jumped 6.3 percent to $1,745 while Microsoft rose 3.9 percent to $111.95. Google's parent company, Alphabet, picked up 3.2 percent to $1,104.

Steady "defensive" stocks lagged the rest of the stock market. Those companies, which include utilities and household goods makers, tend to do well when stocks are in turmoil, but they're less appealing when investors are betting on economic growth.

Industrial companies rose, but not as much as the rest of the market. While some investors hope that Trump and Congressional leadership will pass an infrastructure stimulus bill, they've had those hopes dashed more than once since he took office.

It's not clear how the elections will affect the Trump policy Wall Street might be most concerned about: the trade dispute with China. Trump has imposed taxes of up to 25 percent on $250 billion of Chinese imports and threatened additional tariffs on top of those. Beijing has responded with tariffs on $110 billion of American goods.

A primary concern in Asia is the potential for trade tensions to hobble growth for export-reliant economies.

Economists at S&P Global, Oxford Economics and the Bank of America all agreed that government gridlock will likely result from the Democrats winning control of the House. But they don't think a stalemate will automatically hinder economic growth.

It's more likely that government will play less of a role in spurring economic growth in 2019 and 2020. As a result, the health of the global economy, interest rates set by the Federal Reserve, and spending by U.S. consumers and companies will have a bigger impact on determining the pace of growth.

The Federal Reserve is also meeting Wednesday and Thursday. It's not expected to raise interest rates this month, but investors believe it will do so in December.

Banks, meanwhile, didn't rise as much other stocks slipped. Republicans had discussed a new round of tax cuts if they maintained full control over Congress, which would have expanded the government's deficits further and required it to issue more debt. Government bond yields spiked overnight after a batch of strong early results for some GOP candidates, but then headed lower as Democrats' fortunes improved, making a new tax cut package unlikely.

Democrats' victory in the House also means that Rep. Maxine Waters will likely become chairwoman of the House Financial Services Committee, which oversees the nation's banking system and its regulators. Waters has called for more regulation of banks, and has been vocal about Trump political appointees moving to roll back regulations on banks and other financial services companies.

The yield on the 10-year Treasury note stabilized at 3.21 percent. It spiked as high as 3.25 percent Tuesday night.

The U.S. dollar also weakened. The ICE US dollar index fell 0.3 percent. The U.S. currency fell to 113.35 yen from 113.40 yen, and the euro climbed to $1.1456 from $1.1413.

Major indexes in Europe climbed. The French CAC 40 jumped 1.2 percent, while Britain's FTSE 100 gained 1.1 percent. The DAX in Germany rose 0.8 percent.

The U.S. markets swooned in October, knocking the S&P 500 down nearly 7 percent, as investors worried about rising interest rates and the U.S.-China trade dispute. The S&P 500 is up about 3 percent so far in November.

October is historically a rough month for stocks, though markets usually rise after midterm elections regardless of how the political landscape may change because Wall Street is glad to have more certainty.

Democrats' win in the House means Republicans won't be able to take another shot at repealing the 2010 Affordable Care Act, which extended health insurance coverage to millions of Americans. Voters in Idaho and Nebraska all voted to expand Medicaid, and the winning gubernatorial candidates in Maine and Kansas also favor expanding Medicaid benefits. Voting on a Medicaid expansion proposition in Utah was too close to call.

Health insurers, hospital operators and Medicaid program operators all jumped. UnitedHealth gained 4.3 percent to $214.84. HCA added 4.7 percent to $141.53. Molina, a provider of Medicaid-related services, surged 10.1 percent to $136.75.

Oil prices continued to fall. U.S. crude lost 0.9 percent to $61.67, and Brent crude, the standard for international oil prices, dipped 0.1 percent to $72.07 a barrel in London.

Wholesale gasoline lost 2.8 percent to $1.65 a gallon and heating oil rose 2.2 percent to $2.24 a gallon. Natural gas was unchanged at $3.56 per 1,000 cubic feet.

Gold rose 0.2 percent to $1,228.70 an ounce. Silver picked up 0.5 percent to $14.57 an ounce. Copper added 0.8 percent to $2.75 a pound.

In Asia, Japan's benchmark Nikkei 225 fell 0.3 percent while South Korea's Kospi slipped 0.5 percent. But Hong Kong's Hang Seng edged 0.1 percent higher.

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AP Markets Writer Marley Jay can be reached at http://twitter.com/MarleyJayAP

Ken Sweet in New York, Josh Boak in Washington, Pan Pylas in London and Yuri Kageyama in Tokyo contributed to this report.

  • Associated Categories: Associated Press (AP), AP Online Headlines - Washington, AP Online Congress News, AP Elections, General Presidential Election News, AP Business, AP Business - Economy, AP Business - Financial Markets, AP Business - Industries, AP Business - Financial Services, AP Business - Utilities
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