Stocks Close Mostly Higher Following Decisive GOP Victory - U.S. Commentary

(RTTNews) - Following the lackluster performances seen in the two previous sessions, stocks saw some strength during trading on Wednesday. Buying interest remained somewhat subdued, however, and the major averages ended the day mixed once again.

While the tech-heavy Nasdaq edged down 2.91 points or 0.1 percent to 4,620.72, the Dow and the S&P 500 reached new record closing highs. The Dow climbed 100.69 points or 0.6 percent to 17,484.53 and the S&P 500 rose 11.47 points or 0.6 percent to 2,023.57.

The strength that was visible on Wall Street partly reflected a positive reaction to yesterday's midterm elections, which saw Republicans expand their majority in the House and retake control of the Senate.

Republican candidates won a number of key races and will hold at least 52 Senate seats beginning in January, with the Alaska and Louisiana seats also potentially going to the GOP.

A Republican-controlled Congress is expected to be better for business, although Paul Dales, Senior U.S. Economist at Capital Economics, argued that the election results "don't alter the economic landscape much."

"Even a Republican party which is in control of both chambers of Congress is unlikely to refuse to raise the debt ceiling next year and trigger another Federal government shutdown," Dales said.

The positive reaction to the elections also reflected relief that control of the Senate was decided yesterday rather than requiring runoff elections in the coming months.

Positive sentiment was also generated by a report from payroll processor ADP showing stronger than expected private sector job growth in the month of October.

ADP said the private sector added 230,000 jobs in October following an upwardly revised increase of 225,000 jobs in September. Economists had expected private sector employment to increase by about 220,000 jobs.

However, a separate report from the Institute for Supply Management showing a slowdown in the pace of growth in service sector activity helped to limit the upside for the markets.

The ISM said its non-manufacturing index dropped to 57.1 in October from 58.6 in September, While a reading above 50 indicates continued growth in the service sector, economists had expected the index to show a more modest drop to 58.0.

Sector News

After ending the previous session sharply lower, energy stocks showed a strong move back to the upside on the day amid a rebound by the price of crude oil.

Crude for December delivery surged up $1.49 to $78.68 a barrel after ending the previous session at its lowest closing level in three years.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index and the NYSE Arca Natural Gas Index both jumped by 2.8 percent.

Considerable strength was also visible among utilities stocks, as reflected by the 2 percent gain posted by the Dow Jones Utilities Average. With the gain, the average reached a new record closing high.

On the other hand, gold stocks saw substantial weakness on the day, dragging the NYSE Arca Gold Bugs Index down by 4.7 percent to an eleven-year closing low.

The sell-off by gold stocks came amid a sharp drop by the price of the precious metal, with gold for December delivery tumbling $22 to $1,145.70 an ounce.

Biotechnology and internet stocks also came under pressure on the day, contributing to the modest loss posted by the tech-heavy Nasdaq.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in yet another mixed performance on Wednesday. Japan's Nikkei 225 Index rose by 0.4 percent, while Hong Kong's Hang Seng Index fell by 0.6 percent.

Meanwhile, the major European markets all showed strong moves to the upside on the day. While the U.K.'s FTSE 100 Index surged up by 1.3 percent, the German DAX Index and the French CAC 40 Index jumped by 1.6 percent and 1.9 percent, respectively.

In the bond market, treasuries showed a lack of direction before closing roughly flat for the second straight session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 2.35 percent.

Looking Ahead

Another batch of U.S. economic data could impact trading on Thursday, with traders likely to keep an eye on reports on weekly jobless claims and labor productivity. The latest monetary policy decision in Europe is also likely to attract attention.

On the earnings front, Tesla (TSLA), Qualcomm (QCOM), CBS (CBS), and Whole Foods (WFM) are among the companies reporting their quarterly results after the close of today's trading.