(Reuters) – U.S. stock futures trimmed gains in volatile trading on Tuesday as Democrats made gains in races for the House of Representatives in U.S. midterm congressional elections.
In line with opinion polls, Wall Street had been expecting that President Donald Trump’s Republican party would lose control of the House while retaining the Senate, creating a gridlock in Washington.
S&P 500 e-mini futures EScv1 had earlier gained 0.4 percent as initial results showed Democrats struggling in races for the House, but those gains were pared to 0.15 percent after Democrats picked up at least 10 Republican-held seats and Fox News projected that Democrats would take control of the House..
“Right now, it looks like the Democrats will take the House,” said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey. “Clearly, the futures market was far more buoyant when it looked as if the Democrats would have a much more difficult time taking the House.”
During Tuesday’s trading session, stock market indexes closed higher, but trading volume was thin as investors held back on making big bets ahead of voting results.
Following a steep selloff in October, the S&P 500 remains down more than 5 percent from its record high, with investors worried a decade-old bull market may be ending.
Some investors have said that they would expect a drop, at least in the near term, if the Democrats gain control of both the House and the Senate. In contrast, stocks may rally on hopes of more tax cuts if Republicans retain control of the House.
Sweeping corporate tax cuts passed by the Republicans last year have supercharged earnings growth.
Other investors said the elimination of election uncertainty could create a boost either way.
The Nasdaq Composite .IXIC added 0.64 percent to 7,375.96.
Additional reporting by Daniel Bases, Sinead Carew, April Joyner in New York and Sruthi Shankar in Bengaluru; Editing by Simon Cameron-Moore