US Stock
U.S. equity-index futures rose after Republicans won their first Senate majority in eight years, taking control of both chambers of Congress.
Standard & Poor's 500 Index futures expiring in December climbed 0.4 percent to 2,012.5 at 9:49 a.m. in London. The underlying gauge fell 0.3 percent yesterday as energy companies led losses. It is still trading within 0.3 percent of a record, having rebounded 8 percent from an Oct. 15 low. Dow Jones Industrial Average futures gained 52 points, or 0.3 percent, to 17,357 today.
Republicans retained control of the House and won enough seats to reclaim a Senate majority held by Democrats since 2006. They will control both for the remainder of President Barack Obama's term.
'Republicans are seen as more business friendly, so it's not surprising if markets react positively to the mid-term results,' Veronika Pechlaner, who helps oversee about $2.3 billion at Ashburton Ltd., said by phone from Jersey, the Channel Islands. 'It could make it easier for decisions to be passed, and clearer decision-making is a good thing in U.S. politics. Markets saw some volatility yesterday, so we could see a bit of a rebound today. Earnings have been very reassuring.'
S&P 500 companies are beating analysts' earnings estimates at the fastest pace in four years, while recent economic data have pointed to improvements in the U.S. labor market and consumer sentiment. Of the S&P 500 members that have reported results so far this quarter, 82 percent topped profit projections, while 60 percent beat sales estimates, according to data compiled by Bloomberg.
Historical Gains
Fourth quarters of midterm years have produced average equity gains of 8 percent in the past 65 years, according to the Stock Trader's Almanac. They've been followed by rallies of almost that much in the next three months, making the average 16 percent two-quarter rally the best combination of the election cycles.
The S&P 500 has risen an average 15.1 percent in calendar years when a Democratic president has been opposed by a Republican-controlled Congress since 1945, according to S&P Capital IQ equity strategist Sam Stovall. The returns are nearly identical when Republicans control both the White House and Congress.
Republicans picked up seats in the states of West Virginia, Montana, Arkansas, South Dakota, Iowa, Colorado and North Carolina. Louisiana will go to a run-off, as neither candidate won more than 50 percent of the vote.
Mitch McConnell, a Kentucky Republican, is poised to become the next Senate majority leader and set the legislative agenda for the final two years of Barack Obama's presidency. McConnell has pledged to chip away at the 2010 health-care law and combat government efforts to curb carbon emissions.
--With assistance from Michael P. Regan in New York and Kathleen Hunter in Washington.
To contact the reporters on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net Alan Soughley, Trista Kelley
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