US close: Stocks end higher ahead of mid-term results
Wall Street stocks ended higher on Tuesday ahead of US mid-term election results.
At the close, the Dow Jones Industrial Average was up 0.68% at 25,635.01, while the S&P 500 had gained 0.63% to 2,755.45 and the Nasdaq closed 0.64% firmer at 7,375.96.
The Dow Jones ended 170 points higher as investors closely watched mid-term election results throughout the day, where analysts expect the Democrats to take the House, while the Republican Party is expected to maintain its single-seat majority in the Senate.
Goldman Sachs analysts said this seems to be the most likely outcome, particularly given the number of competitive races for both chambers.
"As our economists have written, polling and historical trends seem to be in the Democrats’ favour to win the House. For example, the president’s party has lost an average of 24 House seats in midterm elections since 1950, and Democrats only need to win 23 seats to gain majority. Meanwhile, Republicans appear to have the advantage in the Senate as Democrats would need to win 8 of 10 competitive races to take the majority, mostly in states that voted for President Trump in the 2016 elections."
GS pointed out that there were two risk scenarios most relevant for markets: that the Democrats take the majority in the Senate and the House and that the Republicans keep control of the House and the Senate.
In the first case, it would expect to see lower Treasury yields due to reduced prospects for fiscal stimulus and therefore lower growth expectations. It would also expect to see weakness in equity sectors exposed to regulatory and tax policies, and underperformance in pharmaceutical stocks given the higher likelihood of new drug price regulations.
In the second case - which GS said has become increasingly likely in recent weeks but remains far from the base case - it would likely see higher Treasury yields and higher equities, particularly pharma stocks, on stronger growth expectations, reduced regulatory uncertainty, and more fiscal stimulus.
In corporate news, Amazon shares closed 0.92% higher following a Wall Street Journal report suggesting that it could split its second headquarters between two cities.
Eli Lilly ended the day 3.85% lower despite better-than-expected third-quarter earnings and revenue from the pharmaceutical company, which also lifted its full-year guidance.
CVS Health was 5.71% firmer at there close after better-than-expected third-quarter earnings and revenue, while Coach parent Tapestry was closed 0.70% lower after it said chief financial officer Kevin Willis will leave the company with effect from February 2019.
Facebook shares closed 0.85% higher after the social media company was informed by authorities of online activity that could be linked to foreign entities. Facebook deleted 30 Facebook accounts and 85 Instagram accounts that could be engaged in coordinated "inauthentic" behaviour.