The futures markets are up strongly this morning following a severe reduction in uncertainty following yesterday’s election results. Major media outlets called the election of former President Trump late last night. At the same time, the Republican Party has won a majority in the United States Senate, and won several contested races for the U.S. House of Representatives. The election results could potentially lead to a more business-friendly legislative and regulatory environment, which the market has interpreted quite positively. That said, quite a number of House races are yet to be called. The U.S. dollar soared while long-term U.S. Treasury bond yields have increased, suggesting significant selling, perhaps in response to the greater certainty. A few notable parts of the market showing substantial price improvements include larger companies in the U.S. banking industry, including JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C), and Wells Fargo (WFC), which rose notably as traders priced in a less-stringent regulatory environment. Overall, these factors suggest a strong start to the trading day.
The stock market was quite positive yesterday as traders generally bought stocks throughout the day as they tried to interpret the potential outcomes from the U.S. election before the results were released last night. The stock market trended higher through the day, only reaching its apex near the end of the trading session. All told, the S&P 500 increased 70 points (up 1.23%), the NASDAQ appreciated 259 points (up 1.43%), and the Dow Jones Industrial Average increased 427 points (up 1.02%). Moreover, market breadth was quite positive yesterday, with advancers outpacing decliners by a 4.6-to-1.0 ratio. Consumer discretionary stocks were amongst the best performers, while materials issues were amongst the weakest, though only on a relative basis.
In commodity news, oil prices largely fell throughout the day as traders priced in the possibility of declining tensions in the Middle East and potentially improved drilling regulations in the United States.
Elsewhere, U.S. Treasury bond yields were largely lower as traders bought bonds ahead of the election results. Additionally, the Federal Reserve will release its decision tomorrow from the latest Federal Open Market Committee (FOMC) meeting, in which it is expected to cut interest rates by 25 basis points. This potential rate cut is seen as a measure to stimulate economic growth. The Chicago Board Options Exchange Volatility Index, or VIX, commonly known as the fear index, fell rapidly yesterday as traders priced in lower stock price volatility in the days ahead.
Several economic reports will be released in the days ahead. These include initial jobless claims, U.S. Productivity, and wholesale inventories on Thursday, while the University of Michigan’s preliminary consumer sentiment index for November will be released on Friday. Elsewhere, a few Federal Reserve Regional Presidents will give remarks on the economy in the days ahead. In earnings news, several hundred companies across a wide array of industries will report quarterly results in the days ahead, giving further insight into how well the broader economy is performing. - John E. Seibert III
At the time of this article’s writing, the author hold positions in one or more of the companies mentioned.
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