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Campaign staff members Cole Robinson (L) and Danielle Hull Robinson react to the projected win for Democratic candidate for Kansas’ 3rd Congressional District Sharice Davids during a watch party on November 6, 2018 in Olathe, Kansas. Davids defeated incumbent Republican Kevin Yoder.
U.S. stock futures rose on Wednesday as the U.S. midterm elections played out just as investors expected, with the Democrats winning back the House of Representatives and splitting Congress.
Along with gaining clarity on the midterm’s outcome, investors were bullish because they believe the Washington gridlock scenario will be best for the market, allowing President Donald Trump’s business-friendly policies to continue but keeping a check on some of his more disruptive market actions like the trade battle with China. History has also pointed to strong returns for equity markets when Congress is divided.
Dow Jones Industrial Average futures rose 135 points at around 8:00 a.m. ET Wednesday, indicating a higher open of more than 180 points. S&P 500 and Nasdaq 100 futures were also higher. The Dow was up 3.7 percent for the year through Tuesday after an October sell-off leading up the election cut into its returns. Relief that Republicans held onto the Senate also helped boost stocks as some investors feared a so-called blue wave clamping down on Trump’s agenda.
“The fact that it’s playing out as expected gives the administration some ability to keep initiatives alive,” said Dan Deming, managing director at KKM Financial. “I think it will be positive in the near term.”
Stocks were poised for a broad rally, as shares of Caterpillar, Goldman Sachs, Amazon and Alphabet rose in premarket trading Wednesday. Caterpillar is seen getting a boost from continued economic growth and the chance that Democrats can temper Trump’s trade war dealings. There’s also some optimism the president will work with Democrats on an infrastructure plan.
Tech shares rose, as a divided Congress could also keep Trump from seriously going after giants like Amazon for being too big and influential on the economy.