Investing.com - Here are the top five things you need to know in financial markets on Wednesday, November 7:
1. Democrats Take House, Republicans Hold Senate
Democrats gained control of the U.S. House of Representatives following U.S. congressional midterm elections, while Republicans held their majority in the Senate, raising the prospect of gridlock in Washington.
The results, seen as a referendum on President Donald Trump's first two years in office, were broadly in line with predictions made by nonpartisan forecasters and betting markets ahead of the election.
Despite his party's loss of House control, Trump tweeted late Tuesday, claiming "tremendous success" in the elections.
2. U.S. Futures Point to Strong Open
U.S. stock futures pointed to a sharply higher open, with the Dow on track for a triple-digit gain, as investors digested results from the midterm elections, which played out just as Wall Street had expected.
This outcome was largely seen as positive for markets since, historically, U.S. stocks have posted solid gains during government gridlock. According to Bank of America Merrill Lynch (NYSE:BAC), the S&P 500 averages an annual return of 12% when Congress is split and the White House is under Republican control.
At 5:35AM ET (1035GMT), the blue-chip Dow futures were up 180 points, or about 0.7%, the S&P 500 futures rose 24 points, or around 0.9%, while the tech-heavy Nasdaq 100 futures indicated a gain of 90 points, or roughly 1.3%.
In earnings, notable companies expected to report results today include Humana (NYSE:HUM), Twenty-First Century Fox (NASDAQ:FOX), Square (NYSE:SQ), Qualcomm (NASDAQ:QCOM), Wynn Resorts (NASDAQ:WYNN), Roku (NASDAQ:ROKU), Groupon (NASDAQ:GRPN), Michael Kors (NYSE:KORS), Dean Foods (NYSE:DF), Office Depot (NASDAQ:ODP), and Keurig Dr Pepper (NYSE:KDP).
Elsewhere, shares in Europe traded higher, with Germany's DAX climbing 1%.
Earlier, Asian stocks were mostly mixed, with markets in China ending lower.
3. Dollar, U.S. Bond Yields Fall
Away from equities, the dollar slipped across the board and bond yields fell, as the broadly expected U.S. midterms election results of a split Congress raised expectations that any major U.S. fiscal policy boost to the economy is unlikely for now.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was down 0.6% to 95.52, the lowest since October 22.
In the bond market, U.S. Treasury prices edged higher, pushing yields lower across the curve, with the benchmark 10-year yield falling to 3.18%, while the 2-year yield dipped to 2.92%.
4. Fed Kicks Off Policy Meeting
The Federal Reserve's Federal Open Market Committee (FOMC) begins its two-day policy meeting today, with a decision due Thursday afternoon.
While no change in policy is expected, investors will be looking for fresh signals from the U.S. central bank on its plans for the rest of the year and beyond.
The Fed raised borrowing costs in September for the third time this year. Solid economic growth combined with rising inflation are likely to keep it on track for another increase in December, despite mounting verbal pressure from the White House.
Fed fund futures currently price in an increase at the end-of-the-year meeting at a probability of around 80%, according to Investing.com’s Fed Rate Monitor Tool.
5. EIA's Weekly Oil Supply Report
In commodity markets, the U.S. Energy Information Administration will release its official weekly oil supplies report for the week ended November 2 at 10:30AM ET (1530GMT).
Analysts expect the EIA to report a climb of around 2.4 million barrels in crude supplies. If confirmed, it would be the seventh straight weekly climb in domestic oil inventories.
After markets closed Tuesday, the American Petroleum Institute said that U.S. crude supplies rose by 7.8 million barrels last week.
U.S. West Texas Intermediate crude futures were up 49 cents, or 0.8%, at $62.70 a barrel. They dropped 1.4% the day before, after hitting their lowest since March 16 at $61.31 a barrel.
International Brent crude oil futures tacked on 73 cents, or 1%, to $72.86 per barrel. They fell 1.4% on Tuesday, at one point touching their lowest since August 16 at $71.18 a barrel.