(Reuters) – U.S. stock futures pointed to strong opening gains for Wall Street on Wednesday after the midterm elections handed Democrats the House of Representatives and saw Republicans reinforce their control of the Senate in a widely expected outcome.
After an initial muted market reaction globally, futures for the three major Wall Street indexes powered higher along with European stocks, while the dollar dropped on lowered chances of further U.S. fiscal stimulus.
A Democrat-controlled House will hamper Trump’s pro-business agenda and could lead to uncertainty about his administration, but few worry about a reversal in already-enforced corporate tax cuts and deregulation measures that have played a large hand in the U.S. market’s rally since the 2016 election.
The results for the Republicans were no worse than feared and pointed to a political gridlock that was largely expected by investors, leaving them free to buy back into a market that had its worst month in seven years in October.
“Given what futures are pointing to right now, I think it’s probably a sign that on balance Republicans have marginally outperformed,” said Geoffrey Yu, head of U.K. Chief Investment Office at UBS Global Wealth Management.
“The big question from here is do we add risk. Given how weak markets were in October, there is a slightly stronger case for us to outperform in the short-term.”
At 6:54 a.m. ET, Dow e-minis were up 161 points, or 0.63 percent. S&P 500 e-minis were up 21 points, or 0.76 percent and Nasdaq 100 e-minis were up 73.5 points, or 1.05 percent.
In a sign of appetite for risk, shares of high-growth technology and internet stocks, including Apple Inc and Amazon.com Inc, rose more than 1 percent in premarket trading.
Following a steep selloff in October, the S&P 500 remains down more than 5 percent from its record high, with many investors worried the market could fall further as inflation gathers steam and the Federal Reserve raises interest rates.
The Fed starts its two-day monetary policy meeting later on Wednesday, but is expected to raise rates next only when it meets in December.
Some investors were hopeful that Republicans and Democrats could agree on spending to improve infrastructure, which could boost many companies’ profits and drive more economic expansion.
“With a better balance of power, even with a little bit of continued malaise in equity markets, a stable infrastructure plan can be a good way of invigorating the domestic economy,” Jim Lydotes, manager of the BNY Mellon Global Infrastructure Income Fund, wrote in a client note.
Investors are also focused on healthcare stocks, one of the best performing sectors this year, with the election results seen as reducing the chances of legislative action to cut medical costs.
Colorado voters rejected a measure calling for greater distances between drilling projects and public spaces, which spurred shares of companies operating in the state.
Anadarko Petroleum Corp surged 9.4 percent, while Noble Energy Inc jumped 7.3 percent, making them the top two gainers among S&P companies trading premarket.