Stock and bond prices are climbing Wednesday morning after Democrats won control of the House of Representatives in the U.S. midterm elections, while Republicans kept a majority in the Senate. Big-name technology and consumer companies are making some of the largest gains.
The outcome was largely what investors expected. While the potential for political gridlock in Washington increases, the market reaction has not been nearly as volatile as after other political events, such as the 2016 presidential vote. Historically markets have performed well after midterm elections and with split control of Congress.
The S&P 500 index gained 34 points, or 1.3 percent, to 2,789 as of 11 a.m. Eastern time. The Dow Jones Industrial Average rose 265 points, or 1 percent, to 25,900. The Nasdaq composite climbed 134 points, or 1.8 percent, to 7,510. The Russell 2000 index of smaller-company stocks added 9 points, or 0.6 percent, to 1,565.
“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.”
It’s not clear how a government divided between a Democrat-controlled House, a Republican Senate and Republican President Donald Trump might govern. 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.
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.
The yield on the 10-year Treasury note went as high as 3.25 percent Tuesday night from 3.21 earlier in the day. On Wednesday morning it dipped to 3.19 percent.
The U.S. dollar also weakened in the morning. The ICE US dollar index fell 0.5 percent. The U.S. currency fell to 113.36 yen from 113.40 yen, and the euro climbed to $1.1469 from $1.1413.
Major indexes in Europe climbed. The French CAC 40 jumped 1.1 percent, while Britain’s FTSE 100 gained 1 percent. The DAX in Germany rose 0.7 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.
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 4.8 percent to $1,721 while Microsoft rose 3.7 percent to $111.72. Google’s parent company, Alphabet, picked up 2.4 percent to $1,095. Industrial companies made smaller gains while banks were little changed.
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.
UnitedHealth, the largest U.S. health insurer, gained 4.7 percent to $275.88 and Anthem added 5.7 percent to $287.64. Those gains were aided by strong results from another insurer, Humana.
Voters in Idaho, Utah and Nebraska all voted to expand Medicaid, and several of the winning gubernatorial candidates also favor expanding Medicaid benefits.
Molina, a provider of Medicaid-related services, surged 7.1 percent to $133.07 and Medicare and Medicaid coverage provider WellCare picked up 5.6 percent to $270.88.
The election had implications for various sectors of the market. Marijuana growers were on track for gains Wednesday morning after voters in Michigan passed a ballot measure to legalize marijuana, while Missouri became the 31st state to approve marijuana for medical use. Utah was also considering that step. A marijuana legalization measure in North Dakota was defeated. Tilray advanced 4.2 percent to $111.34.
Oil drillers Anadarko Petroleum and Noble Energy rallied after Colorado voters rejected a measure that could have sharply reduced oil and gas drilling, including the method known as fracking, by requiring new oil and gas wells to be farther from occupied buildings than allowed under current law.
Anadarko climbed 5.7 percent to $57.87 and Noble rose 5 percent to $28.37.
Oil prices continued to fall. U.S. crude lost 1.1 percent to $61.52, and Brent crude, the standard for international oil prices, fell 0.8 percent to $71.53 a barrel in London.
It’s not clear how the election’s outcome 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 Beijing has responded with tariffs on $110 billion of American goods.
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.
A primary concern in Asia is the potential for trade tensions to hobble growth for export-reliant economies.
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.
Pan Pylas in London and Yuri Kageyama in Tokyo contributed to this report.