Traders work on the floor of the New York Stock Exchange (NYSE) on October 27, 2022 in New York City. Stocks continued their upside gains on Thursday with the Dow Jones up nearly 400 points on a new GDP report that beat expectations.
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Stock futures remained virtually unchanged – following recent market gains – as the midterm election results provided no clear answer on who would control Congress.
Futures contracts linked to the Dow Jones Industrial Average fell 64 points, or about 0.19%. S&P 500 futures were little changed and Nasdaq 100 futures were barely positive around 6:30 a.m. ET.
The shares have posted three straight days of gains. The Dow Jones climbed 333 points on Tuesday for its third consecutive session of gains of more than 1%. The rebound in stocks may in part be due to the election, where Wall Street expected Republicans to gain ground and create a stalemate in Washington, D.C.
But Congressional control was unclear, with the odds indicating Republicans would take the House but without the “red pay” many political analysts had expected.
In one of the key races that could determine control of Congress, Democrat John Fetterman beat Republican Mehmet Oz for the pivotal Senate seat in Pennsylvania, according to an NBC News projection.
Oz had the backing of former President Donald Trump, whose endorsed candidates have had uneven levels of success across the country. Along with Oz’s loss, Trump-backed GOP nominee Tudor Dixon lost his bid to unseat incumbent Democrat Gretchen Witmer in the race for governor of Michigan. The race in Pennsylvania also saw another GOP Trump endorser, Doug Mastriano, lose easily to Democrat Josh Shapiro.
Republicans were widely expected to take control of the House of Representatives, but important races remain up in the air and NBC News has not made any definitive projections on how the party battle will play out.
Morgan Stanley’s chief U.S. equity strategist Mike Wilson said on CNBC’s “Closing Bell” that if it ends up being a divided government, it could help ease concerns about inflation and rising rates. of interest in the future.
“It looks like the House will go with the Republicans,” Wilson said. “It means a stalemate. Probably, less budgetary expenditure will be carried out.”
Although the election captured market attention, investors may want to move on now that the Federal Reserve is raising interest rates to lower inflation, which could tip the economy into recession. .
The political landscape “will fascinate the talkative class in Washington, but for the markets, attention will be on whether a recession is looming, whether the Fed will end its tightening this winter and whether a truce and negotiations are possible in the war in Ukraine,” wrote Greg Valliere, chief U.S. policy strategist at AGF Investments.
The recent market rally came at the start of a strong seasonal period. Historically, stocks tend to rise after midterm elections and the political clarity they bring, and the last two months of the year are seen as a bullish period for investors.
Facebook Parent Shares Metaplatforms rose 3% before market after the social media giant announced it would lay off more than 11,000 workers. Founder and CEO Mark Zuckerberg said he was too optimistic about growth and now needed to streamline the business.
One of the stocks that weighed on the futures was Disney, which fell more than 6% in extended trading after the entertainment giant missed estimates on higher and lower earnings for its fiscal fourth quarter.