Market Snapshot: U.S. stock futures point to three-day winning streak with midterm elections under way

by | Nov 8, 2022 | Stock Market

U.S. stock futures were a touch firmer on Tuesday, but with traders cautious ahead of the U.S. midterm elections and important inflation data later in the week.How are stock-index futures trading
S&P 500 futures
ES00,
+0.12%
added 3 points, or 0.1%, to 3818

Dow Jones Industrial Average futures
YM00,
+0.14%
rose 31 points, or 0.1%, to 32869

Nasdaq 100 futures
NQ00,
+0.31%
gained 26 points, or 0.2%, to 11040

On Monday, the Dow Jones Industrial Average
DJIA,
+1.31%
rose 424 points, or 1.31%, to 32827, the S&P 500
SPX,
+0.96%
increased 36 points, or 0.96%, to 3807, and the Nasdaq Composite
COMP,
+0.85%
gained 89 points, or 0.85%, to 10565.

What’s driving markets Stocks were striving to record a three-day winning streak. The S&P 500’s 2.3% gain over the previous couple of sessions was partly the result of buyers front-running a traditional “buy signal” event, the completion of the U.S. midterm elections, according to some analysts. “U.S. equities began the week bouncing back, with the S&P 500 convincingly up ahead of the U.S. midterm elections on Tuesday, where a divided government in Washington is ostensibly bullish for equities,” said Stephen Innes, managing partner at SPI Asset Management. “The rationale is pretty straightforward. Gridlock cross-checks each party’s ‘worst impulses’, and less activist fiscal policy is conducive to lower market volatility,” Innes added. Jim Reid, strategist at Deutsche Bank, said: “It’s no exaggeration to say that midterm elections are one of the best historic buy signals for equities we have. In fact, in the 19 midterm elections since WWII, the S&P 500 has always been higher one year after the vote.” However, Reid questioned whether any of the previous 19 occasions had to contend with a macro-economic environment of the kind currently pressuring the market, namely the prospect of yet higher interest rates alongside a possible recession in 2023.

Crucial to determining that scenario is the Federal Reserve’s need to keep tightening monetary policy to combat inflation running near 40-year highs. Consequently, for many investors it is Thursday’s consumer prices data and not politics that will determine the market’s trajectory going into the end of the year. The message from the bond market in that regard is not particularly supportive of stocks. The monetary policy-sensitive 2-year Treasury yield
TMUBMUSD02Y,
4.717%
is holding above 4.7%, near its highest since 2007. In addition, despite the S&P 500 having bounced 6.4% from its 2022 closing low in mid October, the bear market downtrend remains intact, warn some analysts. “The [S&P 500’s] spike back …

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