November 7, 2018
Mid-term elections gave back control of the House of Representatives to the Democrats while the Republicans retained control of the Senate – a result expected by most investors, many of whom responded by buying not only stocks but, to a lesser extent, bonds. Investors likely reasoned that the gridlock in Washington will lead to more fiscal restraint, a positive for stocks and bonds alike as it would relieve some of the upward pressure on interest rates. In scheduled economic news, EIA crude oil inventories did post a large weekly build of 5.8 million barrels, pulling oil prices down to the lowest level since March and off almost $15 dollars from their October peak. In lagging data, consumer debt rose less than expected in September, showing consumers cautious and frugally paying down some of their credit-card debt, which is not good news for immediate consumer spending but does suggest strong spending reserves for the holidays.
The stock market was up sharply before the morning bell and continued to rally throughout the session, with the Dow closing on the highs and up 2.13 percent to 26,180 while the Nasdaq surged 2.64 percent higher to 7,571. The yield on the 10-year bond, which normally rises when stocks post such large gains, was little changed at 3.21 percent while the dollar index fell 0.2 percent to 96.11. Gold closed up 0.1 percent at $1,227.5 per ounce while crude oil dropped 0.9 percent to $61.67 per barrel.