Which Way Is Up? Stocks are struggling for direction Thursday, a day after the largely anticipated results of Tuesday’s midterm elections sent stocks higher. We await the end of the Federal Reserve’s policy meeting today, while watching Roku (ROKU) tumble after releasing earnings. In today’s Intraday Update we…
…talk about midterms again; …look to the Federal Reserve’s policy meeting; and …ponder December. Now What?
Stocks were mixed on Thursday afternoon, as the postelection euphoria wore off.
As we noted yesterday, no surprises were good news—at least for markets—in the midterms. “Overall, the election outcome is neutral for risk assets,” writes UBS’s Justin Warring. “Within U.S. equity sectors, we see limited impact, due largely to the limits on passing legislation in a divided government,” although financials and industrials could be the two exceptions “where potential tail risks may arise from congressional politics.”
Markets seem to agree that things went well. The S&P 500 saw its largest postelection gain in more than 35 years Wednesday. “The extent of yesterday’s post-midterm rally may have taken some market participants by surprise, and as the S&P 500 moved above 2800 it looks like a good bit of short covering helped boost the rally,” notes TD Ameritrade’s JJ Kinahan. As for today, he writes that “some participants may be taking profits and that trading might be relatively subdued as investors and traders wait for the Fed announcement.”
While markets are largely pricing in a 25-basis-point interest rate increase in December, the central bank is expected to hold steady today, although investors will no doubt be