US Stocks Rise as Republicans Win Senate, Payrolls Gain
Bloomberg News
The Standard & Poor's 500 Index approached an all-time high as Republicans won their first Senate majority in eight years, taking control of both chambers of Congress, and data showed companies added more workers in October.
The S&P 500 climbed 0.5 percent to 2,021.85 at 9:32 a.m. in New York, heading for a record close.
'With the election results, the strong ISM manufacturing result from the other day and today's employment report, it continues to improve investor sentiment,' Robert Pavlik, who helps oversee $4.5 billion as chief market strategist at Banyan Partners LLC in New York, said in a phone interview. 'The market also likes the fact that the ECB might deliver some additional quantitative easing-type measures.'
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.
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.
Historical Gains
The S&P 500 (SPX) 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.
Stocks haven't needed a united Congress to post gains during the bull market that began in March 2009. Since Nov. 2, 2010, when Republicans won a majority in the House while Democrats held the Senate, the S&P 500 has gained 69 percent, including a 30 percent rally in 2013 that was the biggest annual advance since 1997.
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.
'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. 'Earnings have been very reassuring.'
The S&P 500 fell 0.3 percent yesterday as energy companies led losses amid a drop in oil prices. The gauge has rebounded 8.6 percent from an Oct. 15 low. 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, 81 percent topped profit projections, while 61 percent beat sales estimates, according to data compiled by Bloomberg.
Companies in the U.S. added 230,000 workers to payrolls in October, figures from Roseland, New Jersey-based ADP Research Institute showed today. The median forecast of 44 economists surveyed by Bloomberg called for an advance of 220,000. Estimates ranged from gains of 193,000 to 265,000.
The private data come before a Labor Department report this week that may show private payrolls rose by 223,000 last month, according to a Bloomberg survey. The jobless rate probably held at a six-year low of 5.9 percent, the survey showed.
'There's been a slight bump on the election result last night,' Walter 'Bucky' Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama, said in a phone interview. 'The ADP number was in line with what people were expecting, which is helping, and we have the payroll data coming out on Friday.'
To contact the reporters on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net; Joseph Ciolli in New York at jciolli@bloomberg.net
To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net; Jeff Sutherland at jsutherlan13@bloomberg.net Jeff Sutherland, Trista Kelley
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