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Wall St rallies despite political gridlock

Sky News logo Sky News 07/11/2018
Traders work on the floor of the NYSE in New York © Getty Traders work on the floor of the NYSE in New York

Wall Street rallied on Wednesday despite the prospect of political gridlock after the midterm elections.

The Dow Jones Industrial Average rose 310.88 points, or 1.22%, to 25,946 and the tech-heavy Nasdaq jumped 134 points, or 2%, to 7,510, while the broader S&P 500 index climbed 36 points, or 1.33%, to 2,791.94.

Democrats seized control of the House of Representatives on Tuesday, while Republicans tightened their grip on the Senate, pointing to a political gridlock in Washington.

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While a Democrat-controlled house will limit President Donald Trumps's ability to push through legislation, investors had widely expected the outcome of the midterm elections.

"Wall Street welcomed the outcome of the midterm elections," said David Madden, market analyst at CMC Markets.

"Historically, equity markets have performed well out of a divided Congress as traders feel the government finds it difficult to get new laws passed, and therefore not much changes.

"The US economy had positive momentum going into the midterms, and that is likely to continue."

The election was held against a backdrop of huge volatility during October that saw many top indices enter technical correction territory.

The main worries included the effect of rising US interest rates and the US/China trade war.

There are predictions that now the election is out of the way, stock market values could start to creep back up towards record values again as buying opportunities are sought.

"The rise in popularity of the Democrats could be construed as a vote against Trump's tough trade stance, and perhaps the White House might soften its position regarding China," Mr Madden said.

"There is speculation the Democrats are keen to improve infrastructure, and we are seeing a rally in Caterpillar."

The technology and healthcare sectors rose more than 1.5% each with the prospect of restrictive legislation fading because of possible gridlock.

"Mr Trump has set his sights on tech giants like Amazon, and the outcome of the midterms might make it more difficult for him to go after tech titans," Mr Madden said.

By the end of trade in Europe, the FTSE 100 closed up 1.1%, the Dax in Frankfurt climbed 0.8% and the CAC 40 in Paris added 1.24%.


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