SAN FRANCISCO (Reuters) – U.S. stock futures pointed to a strong opening on Wall Street after Democrats won control of the House of Representatives in U.S. mid-term congressional elections on Tuesday.
With President Donald Trump’s Republican party holding onto their majority in the Senate, according to CNN, NBC and ABC News, the results were in line with expectations on Wall Street that Washington was set for gridlock.
Still, a House controlled by the Democrats will hamper Trump’s business-friendly agenda and could lead to uncertainty about his administration at a time when investors are already worried that a decade-old bull market may be ending.
S&P 500 e-mini futures were up 0.2 percent, implying traders expect the U.S. stock market to open with a gain on Wednesday.
“Everyone was bracing for any possible, crazy scenario to show itself tonight, but it basically looks like the baseline consensus forecast was correct,” said Michael Purves, head of equity derivatives strategy at Weeden & Co, in New York.
“If the futures are up now and they stay up, it’s because there is an uncertainty factor that is now out of the market.”
Following a steep selloff in October, the S&P 500 remains down more than 5 percent from its record high, with many investors worried the market could fall further as inflation gathers steam and the Federal Reserve raises interest rates.
Control of the House will let Democrats put Trump’s administration under more intense scrutiny, likely making Wall Street nervous.
Gridlock in Washington will all but eliminate the potential for more tax cuts, which Trump has called for and which many on Wall Street would like. Sweeping corporate tax cuts passed by the Republicans last year have supercharged earnings growth.
Some investors were hopeful that Republicans and Democrats could agree on spending to improve infrastructure, which could boost many companies’ profits and drive more economic expansion.
The Democrats’ ability to prevent Trump from passing new laws may push him to focus more on resolving U.S. disputes with China, other investors said.
In Tuesday’s trading session, the Dow Jones Industrial Average rose 0.68 percent to end at 25,635.01 points, while the S&P 500 gained 0.63 percent to 2,755.45.
The Nasdaq Composite added 0.64 percent to 7,375.96.
“Now that the elections are behind us, earnings and the Fed will be back in focus. All indications are that neither of those factors support expanding multiples for stocks,” said Mohannad Aama, managing director at Beam Capital Management in New York.
Additional reporting by Daniel Bases, Saqib Ahmed, Sinead Carew, April Joyner in New York and Sruthi Shankar in Bengaluru