Dow starts the week higher as investors await midterm elections and inflation report

Katz: Much of the damage to the stock market has already been done

The Dow Jones Industrial Average rose on Monday, kicking off a busy week ahead of the congressional midterm elections and key inflation data in the next few days.

The Dow gained 210 points, or 0.7%, while the S&P 500 gained 0.3%. The Nasdaq Composite rose 0.1%.

Apple shares fell more than 1% after the tech company said iPhone production had been temporarily reduced due to Covid-19 restrictions in China. Meanwhile, shares of Palantir fell more than 9% after the company reported disappointing quarterly results. Carvana fell 11% after falling more than 20% earlier in the day.

Shares in Facebook parent Meta rose more than 5% after The Wall Street Journal reported that the company could start laying off workers as early as Wednesday. McDonald’s shares hit an all-time high, up about 1%.

Tuesday’s midterm elections will decide which party will control Congress and influence the direction of future spending. Democrats currently control the House of Representatives and hold a majority in the Senate.

Investors are likely to approve of a potential stalemate in the midterms, as a Democratic president versus a Republican or divided Congress has historically meant above-average gains, RBC’s Lori Calvasina said in a report Monday.

“The market is hoping that some form of Republican sweeping Congress will lead to a gridlock in Washington, and they think it’s fine, or at least no new spending, which is good for interest rates and Treasury supply,” said Bullard, vice president of Hirtle Callaghan & Co. Chief Information Officer Conger.

On the economic front, investors expect Thursday’s consumer price index report to provide further insight into how far the Fed needs to go to bring down inflation. A red-hot report could signal to investors that a shift away from long-term high rates may not be imminent.

“[In] In order for the stock and bond markets to match the post-peak inflation performance noted in the table, inflation needs to continue to fall—and faster than we have ever seen. Until the Fed signals a ‘pivot’ is near, things may remain challenging,” Baird’s Ross Mayfield wrote in a recent report.

Elsewhere, several companies are expected to report including Monday Activision Blizzard, Lyft and two people interact. Corporate earnings season is coming to a close, with most companies in the S&P 500 reporting results.

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