Stocks Slip as Midterm Results Remain Unclear

Stocks slipped on Wednesday morning, as investors reacted to results from the U.S. midterm elections which featured high-profile victories for both parties, as overall control of the House and Senate remained uncertain.

Futures on the S&P 500 fell 0.2 percent in premarket trading on Wednesday, after posting small gains late on Tuesday which coincided with early Republican victories after the markets closed. The benchmark stock index eked out a 0.6 percent gain during regular trading hours on Tuesday.

Votes are still being counted and it may take days to get a clear picture of the result. According to the most recent projections, Republicans are favored to win control of the House while the Senate is leaning toward the Democrats.

Investors and analysts have said that divided government — where Democrats lose control of at least one chamber of Congress — could be positive for the stock market because it would probably limit any major legislation that could impact corporate profitability.

“You just have politicians stop doing stuff and generally the market likes that,” said James Masserio, the co-head of equities in the Americas for Société Générale.

However, past market moves after the midterms are less conclusive on what combination of control between Congress and the White House is best for markets. The S&P 500 has risen on the day after the last six midterm elections, and also posted gains in the year after the vote.

“Markets historically reward less uncertainty and split government,” Ben Laidler, the global markets strategist at eToro, wrote in a post-election report. “But it has potential for medium term pain, from uncertainty over the debt ceiling to recession spending.

The election is not the only thing on investors’ minds. Many have said that against a backdrop of high inflation, rising interest rates and tense geopolitics, the midterms have receded in importance. The next big event for investors comes on Thursday, when new data about inflation in the United States will steer expectations over how aggressively the Federal Reserve could be in raising interest rates, which raises costs for companies and dampens economic growth.

“There are these major forces that kind of drown out the election,” Mr. Masserio said.