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Wall Street to open slightly lower as U.S. elections kick off

Reuters 2018-11-06 19:38:33

(Reuters) - U.S. stocks were on track to open slightly lower on Tuesday, as investors awaited the outcome of U.S. midterm elections that could shape the future of Donald Trump’s presidency and test his tax and trade policies.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., November 5, 2018. REUTERS/Brendan McDermid

The cautious mood set in as investors broadly braced for opposition Democrats to take over the House of Representatives and Trump’s Republican Party to retain the Senate.

A political gridlock between the White House and Congress could hinder Trump’s pro-business agenda and raise concerns about political instability, but most analysts say this may not be the worst outcome for equities.

There are fears that there could be a sharp selloff in the market if the Democrats sweep both the House and the Senate. In contrast, stocks may rally on hopes of more tax cuts if Republicans retain control of the House.

“You haven’t seen any huge de-risking or risk-taking in anticipation of the outcome. It shows that the market is prepared for the base outcome, which is a split Congress,” said John Swarr, investment specialist at Penn Mutual Asset Management.

“There’s not much chance of a new policy surprising to the upside or the downside with a split Congress. But markets might like that especially after the recent volatility we had in October.”

A confluence of factors including rising U.S. interest rates, global trade disputes and worries about corporate profit growth had set off a rout in global stock markets in October, with the S&P 500 locking its worst month in seven years.

Investors are also looking for signs of a let-up in the U.S.-China trade dispute, with both countries expected to hold top-level diplomatic and security talks in Washington on Friday.

Chinese Vice President Wang Qishan said on Tuesday China was ready to hold discussions and work with the United States to resolve trade disputes.

At 8:40 a.m. ET, Dow e-minis 1YMc1 were down 40 points, or 0.16 percent. S&P 500 e-minis ESc1 were down 5.25 points, or 0.19 percent and Nasdaq 100 e-minis NQc1 were down 19 points, or 0.27 percent.

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Despite an Apple-led weakness in technology stocks on Monday, the S&P 500 .SPX ended half a percent higher as investors bought defensive stocks such as real estate, consumer staples and utilities.

Among stocks, Mylan NV (MYL.O) jumped 8.8 percent in premarket trading after the drugmaker beat analysts’ estimates for third-quarter profit.

Pharmacy chain CVS Health Corp (CVS.N) was up about 3 percent after its quarterly profit beat analysts’ estimates on higher sales of prescription drugs and consumer health and beauty products.

Booking Holdings (BKNG.O) gained 6.6 percent after the online travel agency forecast fourth-quarter profit above estimates.