The US stock exchanges recorded a positive session on Tuesday as investors are eagerly awaiting the results of the midterm elections in the country. The blue-chip index Dow Jones Industrial Average jumped by 176 points, driven mostly by Caterpillar and IBM. The broader index S&P 500 also finished with increase of 0.6%, while the industrial and commodity sectors performed best. The technology index Nasdaq Composite ended with a growth of 0.6%.
However, the gains were limited, as investors expect more clarity around the election before making big stakes on the stock.
The Democrats are expected to take control of the House of Representatives, but Republicans are likely to retain a slight majority in the Senate. Historically, markets usually perform well with a divided government. Since 1928, the S&P 500 has had an average return of 12% when the Congress was split and the Republicans have controlled the White House.
But these are very different choices and divisions may not be good for the market. According to some analysts, the Republican government has implemented key policies that help the economy grow, and divisions will delay such policies in the future.
In the bond markets, the yield on 2-year government securities climbed to its highest level in ten years, reaching 2.924%. Meanwhile, the yields on 10-year government bonds reached 3.212%, and on 30-year government securities fell to 3.426%.
On the foreign exchange markets, the dollar as a whole remained unchanged on election day. The dollar index, which measures its value against six competing currencies, rose only 2 points to 96.3 points. This may suggest that the market is more likely to expect a victory for Democrats in the House of Representatives.
On commodity markets, the crude oil prices fell on Tuesday, short on a bear market after the US allowed some of Iran’s largest customers to continue to import oil from the country without violating US sanctions against the Islamic Republic.
The futures on US crude oil WTI ended the session with decrease of 0.89 USD, or 1.4%, to 62.21 USD per barrel. The lowest level that the variety reached within the day was 61.31 USD, which is more than 20% below its nearly four-year high of 76.90 USD per barrel last month.
Brent crude oil futures declined by 1.27 USD, or 1.7%, to 71.90 USD per barrel, before even reaching a level of 71.18 USD per barrel – 18% below the October peak.
Gold also fell on Tuesday. Its price dropped by 0.39% to 1,227.50 USD per ounce.