US pre-open: Futures higher as Americans overwhelmingly reject Republican party in midterms

(Sharecast News) - Wall Street futures were higher ahead of the open on Wednesday as market participants digested news that the Democrats had taken control of the US Congress, after voters overwhelmingly rejected Donald Trump's Republican party in historic midterm elections. As of 1245 GMT, Dow Jones futures were up 1.59%, while S&P 500 and Nasdaq-100 futures advanced 1.08% and 0.76%, respectively.

The Dow closed 197.26 points lower on Tuesday, dragged into the red by Apple shares after the tech giant issued a weaker-than-expected margin outlook and disappointing quarterly iPad sales.

Wednesday's primary focus looked set to be news that, in a contest dominated by the spiralling cost of living - in large part attributable to the US president's decision to go to war with Iran - a Democratic landslide had ended Republican control of both chambers, with majorities secured in the House of Representatives and Senate. Democrats also scored victories in key gubernatorial races, including Texas.

Trump appeared to accept the result, even telling Fox News that the Democrats "did a good job". But he also posted on social media: "I wasn't on the Ballot and if I was, we would have won IN A LANDSLIDE!", as well as a picture of a red baseball cap with the word "Veto" on it. The president had already warned he would block legislation in the event of the Republicans losing control of the Senate, stating: "After a couple of months of vetoes, they'll call and they'll say, 'how do we get this stuff done?'. And we'll work together. I have the power to veto."

Investors had headed into the US midterm elections concerned that a strong Democratic showing could weigh on parts of the market, particularly companies linked to the artificial intelligence buildout, amid fears of tighter regulation and potential restrictions on data centre development. However, hopes that the election result could lead to legislative gridlock, which has historically been viewed positively by markets, helped lift risk appetite.

AMD traded higher after the chipmaker delivered quarterly earnings and revenues comfortably ahead of expectations, while solar stocks also rallied as renewable energy names were in favour on expectations of a policy shift in Washington. Going the other way, AI-focused cloud infrastructure firms, defence contractors and prison operators all came under pressure.

McDonald's reported third-quarter revenue of $7.16bn, up 1% year-on-year, while net income increased 9% to $2.49bn and diluted earnings per share rose 10% to $3.51, ahead of expectations. The fast-food giant also delivered a 1.5% increase in global comparable sales, with US same-store sales down 0.2%, a smaller decline than analysts had feared.

Meanwhile, Uber posted a 10% increase in third-quarter revenues to $14.76bn, slightly ahead of forecasts, as gross bookings grew 20% to $59.81bn and trips rose 16% to 4.06bn. Net income fell 92% to $512m, however, reflecting a $476m loss related to the revaluation of equity investments, while diluted earnings per share declined to $0.25 from a year earlier.

Arm Holdings will report earnings after the close.

On the macro front, US mortgage applications fell 1.2% in the week ended 30 October, according to the Mortgage Bankers Association of America, following a 3.4% rise in the prior week. Applications to purchase a home fell 2% week-on-week, while applications to refinance a mortgage ticked up just 0.1% The fall comes despite a modest easing in borrowing costs, with the average rate on 30-year fixed mortgages decreasing to 7.3% from 7.37% - its lowest level since September.

Still to come, ADP's October employment change figures will be published at 1315 GMT, whhile September's goods and services trade balance figures were slated for release at 1330 GMT, S&P Global's October services and composite PMIs will be released at 1445 GMT, and the Institute for Supply Management's services PMI will follow at 1500 GMT.







Reporting by Iain Gilbert at Sharecast.com