Wall Street takes deep breath, gives thumbs-up on midterms

The Dow Jones rose by 400 points after the president said he would negotiate with the Democrats on economic growth.
Traders work on the floor of the New York Stock Exchange
Traders work on the floor of the New York Stock Exchange on Nov. 7, 2018.Justin Lane / EPA

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By Erik Sherman

Wall Street came out of the gate strong on Wednesday, with the Dow Jones Industrial Average seeing an immediate gain of 277 points at the opening bell and topping 400 by mid-afternoon. The Nasdaq was up by 2 percent in early afternoon trading, and the S&P 500 spiked by around 1.5 percent.

Market positivity was a sigh of relief after President Donald Trump's continued trade wars, whiplash share volatility during October, higher interest rates on the Federal Reserve's horizon, a tightening labor market, geopolitical tensions including reimposed sanctions on Iran, and a question of whether the good times have to end after a historically long bull run.

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Trump signaled on Wednesday that he would be willing to work with the Democrats to bolster the nation's economic growth.

"Hopefully we can all work together next year to continue delivering for the American people, including on economic growth, infrastructure, trade, lowering the cost of prescription drugs," said Trump at a White House press conference. "There are a lot of great things we could do together," he added.

Also fueling the good feelings for markets were some strong earnings in healthcare and pharmaceuticals. CVS earnings were up 15 percent year on year, while Eli Lilly beat expectations and raised estimates on strong sales in the diabetes market.

Additionally, the Fed kicked off a two-day monetary policy meeting on Wednesday, with markets having already priced in expectations of a rate hike no earlier than December.

Global markets reacted generally positively to signs of met expectations after midterm elections that saw Democrats take the House and Republicans tighten their grip on the Senate. The FTSE 100 and DAX Performance Index were both up at least 1 percent.

The dollar was down slightly in Europe, which may reflect international concern over the prospect of ongoing gridlock in Washington and Democratic promises to unleash a different blue wave: investigations into the Trump administration, which would likely further frustrate the president and possibly undermine investor confidence. In addition, Democratic control of the House will likely mean a farewell to further tax cuts.