(Reuters) – U.S. stocks surged on Wednesday, as investors piled into growth sectors such as technology and healthcare on relief that the outcome of the U.S. midterm elections was as expected.
Democrats won control of the House of Representatives on Tuesday, while Republicans tightened their grip on the Senate, pointing to a political gridlock in Washington.
The technology and healthcare sectors rose more than 1.5 percent each, with investors betting that a gridlocked Congress would not be able to push through restrictive regulations, a fear that has weighed on the growth sectors.
A Democrat-controlled House will hamper President Donald Trump’s pro-business agenda, but the results for Republicans were no worse than feared, allowing investors to buy back into a market that had its worst month in seven years in October.
“A lot of what was holding the market back was fear of what might happen, and the fact that it’s over now will eliminate a lot of it,” said Brad McMillan, chief investment officer for Commonwealth Financial in Waltham, Massachusetts.
At 10:06 a.m. EDT the Dow Jones Industrial Average was up 142.47 points, or 0.56 percent, at 25,777.48, the S&P 500 was up 21.30 points, or 0.77 percent, at 2,776.75 and the Nasdaq Composite was up 87.50 points, or 1.19 percent, at 7,463.46.
Following a steep selloff in October, the S&P 500 remains down more than 5 percent from its record high, as uncertainty about the election and fears about rising interest rates and trade wars roil stocks globally.
The Federal Reserve starts its two-day monetary policy meeting on Wednesday, where it is expected to keep interest rates unchanged, but a rate hike in December is largely priced in.
“The policy path implied by this outcome shifts the narrative away from rising rates at least temporarily,” Morgan Stanley’s Michael Zezas wrote in a client note.
“In the near term, that could alleviate the pressure that stocks have felt in recent weeks.”
But, financial stocks slipped 0.27 percent, led by a 0.52 percent decline in bank stocks.
The S&P energy index jumped 1.1 percent as oil prices rose on a report that Russia and Saudi Arabia are discussing whether to cut crude output next year.
Anadarko Petroleum Corp surged 7.1 percent and Noble Energy Inc jumped 4.3 percent after Colorado voters a rejected a tougher rule on oil and gas drilling, which spurred shares of companies operating in the state.
Advancing issues outnumbered decliners by a 1.90-to-1 ratio on the NYSE and a 1.58-to-1 ratio on the Nasdaq.
The S&P index recorded 24 new 52-week highs and three new lows, while the Nasdaq recorded 42 new highs and 28 new lows.
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