Stocks ended higher on Tuesday during voting in midterm elections that will determine control of the U.S. Congress, with investors betting on a political stalemate that could prevent major policy changes.
It was the third straight day of gains on both the U.S. and Canadian stock markets, leaving the Dow Jones Industrial Average down less than 10% year-to-date and the S&P/TSX Composite Index down about 7%. Materials led advancers on Canada’s benchmark stock index, thanks to a rally in gold and other metal prices.
All 435 House of Representative seats and some 35 seats in the Senate are on the ballot, with experts saying there may be days of waiting before it is clear who won certain races. Nonpartisan forecasts and opinion polls suggested a strong chance of Republicans winning a House majority and a tight race for Senate control.
2022 U.S. midterm elections live updates
“On balance, financial markets like gridlock. To the extent that change will be slow and evolving, a divided government of course provides that backdrop,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis.
A surprise victory for Democrats, however, could raise concerns about tech-sector regulation as well as budget spending that could add to already-high inflation, according to market strategists.
Investors are also awaiting a key U.S. inflation reading due on Thursday, which is expected to show easing in consumer prices and provide further clues on whether the Federal Reserve could soften its campaign of aggressive interest rate hikes.
Traders are divided about whether the Fed will raise rates by 50 basis points or 75 basis points at the central bank’s meeting in December, according to CME Fedwatch tool.
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Cryptocurrency-related stocks including Coinbase Global and Microstrategy tumbled after Crypto giant Binance signed a nonbinding agreement to buy rival FTX’s non-U.S. unit to help cover a “liquidity crunch” at the cryptocurrency exchange.
“Some investors will shoot first and ask questions later, but the good thing is crypto is kind of isolated. They are on their own, they really are not part of the equity market,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
The S&P 500 is up about 7% from its October closing low, but it remains down about 20% in 2022 due to worries that the Fed’s aggressive rate hikes could cripple the U.S. economy.
The S&P 500 climbed 0.56% to end the session at 3,828.13 points.
The Nasdaq gained 0.49% to 10,616.20 points, while the Dow Jones Industrial Average rose 1.02% to 33,160.83 points. Helping the blue-chip Dow, shares of drugmaker Amgen Inc rallied almost 6% to a record high after the company reported positive data related to its cholesterol drug and obesity treatment.
Of the 11 S&P 500 sector indexes, 10 rose, led by materials , up 1.72%, followed by a 0.92% gain in information technology.
The TSX rose 114.40 points, or 0.59%, to 19,660.31, powered by a more than 4% jump in the materials sector.
Gold prices rose more than 2% to breach the key US$1,700 per ounce level, following a fall in the U.S. dollar and bond yields as well as some technical buying. U.S. gold futures settled at US$1,716. Copper prices rebounded on supply worries and the weaker dollar, shrugging off an upsurge in COVID-19 cases in the world’s top metals consumer China. U.S. Comex copper futures climbed 2.6% to $3.70 a pound. Copper prices got a boost after Chile’s Codelco, the world’s biggest copper miner, proposed a 33.3% increased premium for 2023 supplies to Chinese customers. Surging premiums come against a backdrop of low inventories and mining disruptions.
The price of oil slipped as worsening COVID-19 outbreaks in China heightened fears of lower fuel demand. U.S. crude prices settled 3.1% lower at $88.91 a barrel.
Among individual stock moves, shares of TransAlta Corp jumped 7.1% after the company reported better-than-expected third-quarter results and increased its full-year forecast.
Algoma Steel Group dropped 6% after missing analysts’ second-quarter earnings expectations.
Maple Leaf Foods rose 12.4% as it reported a rise in third-quarter sales.
Home Capital fell 7.3% after reporting a large decline in mortgage originations.
In the U.S., Take-Two Interactive Software Inc slumped almost 14% after the videogame publisher lowered its annual sales outlook, while ride-hailing firm Lyft Inc tumbled 23% after forecasting current-quarter revenue below Wall Street estimates.
Advancing issues outnumbered falling ones within the S&P 500 by a 2.5-to-one ratio. The S&P 500 posted 21 new highs and 9 new lows; the Nasdaq recorded 97 new highs and 258 new lows. Volume on U.S. exchanges was relatively light, with 11.7 billion shares traded, compared with an average of 11.8 billion shares over the previous 20 sessions.
In credit markets, Canadian government bond yields were lower across a flatter curve, with the 10-year falling 12.5 basis points to 3.476%.
Reuters, Globe staff
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