Despite a wobble during the afternoon, stocks finished Tuesday’s trading with a modest advance, continuing a recent recovery with their third consecutive day of gains.
The Dow Jones concluded trading at 33,160.83, an advance of 333.83 points on the day. At the same time, the S&P 500 rose 21.31 points to close at 3,828.11, while the Nasdaq climbed 51.68 points to end at 10,616.20.
Ten of the 11 S&P sectors finished in the green, although Materials represented the only segment to rise more than 1%. Meanwhile, Consumer Discretionary posted a fractional decline.
Stocks pushed higher earlier in the session, adding to gains recorded over the previous two sessions. The upswing has come as investors have grown more comfortable with the Federal Reserve’s medium-term plan for interest rates.
The major averages stumbled during the afternoon amid the results of the latest auction of 3-year Treasury notes. Stocks quickly regained their footing, however, and finished the day solidly in the green.
Trading took place as voters headed to the polls to decide the U.S. midterm elections. Republicans are expected to take control of the House of Representatives, with the Senate more of a toss up.
“Given supply-side inflation, geopolitical uncertainty, and rising interest rates, the most bullish factor for stocks could be the bearish sentiment,” analyst Andrew Hecht told Seeking Alpha, noting that “thin conditions preceded the U.S. midterm elections.”
Adding that the final election results may not be known for weeks, Hecht looked past the political wrangling, saying, “let’s hope the holiday season after the election can usher in a period of sanity.”
Turning to the fixed-income market, bonds rallied during the session, sending yields lower. The U.S. 10-year Treasury yield (US10Y) slipped 7 basis point to 4.14%, while the 2-year Treasury yield (US2Y) declined 5 basis point to 4.68%.
Commenting on the election, UBS predicted that a Republican victory in Congress would likely lead to “no further fiscal support in our (U.S. economic) projection beyond what has been already legislated.”
“The politicization of fiscal expansion seems likely to be a material obstacle until after the presidential election in November 2024, and gridlock likely resumes in the meantime,” UBS added as part of its a research note.
“However, if we are wrong and Democrats retain control of Congress, more meaningful fiscal policy could be possible, particularly in fighting a recession. Of course, that would risk higher interest rates, as the FOMC would likely remain vigilant about enforcing the economy to stay within anti-inflation speed limits,” the firm stated.