Yields fall on election results, oil prices. Treasury yields declined alongside oil prices, as Democrats swept Congress in yesterday’s midterm elections, shifting expectations surrounding the Iran war. The 2-year yield closed 5 bps lower at 4.58%, while the 10-year yield closed 7 bps lower at 4.89%. Brent crude futures dropped nearly 9% to trade around $95 per barrel, now below the $100 level for the first time in nearly a month. Meanwhile, equities rallied, with the S&P 500 and NASDAQ closing 1.58% and 1.44% higher, respectively.
Markets digest midterm results as Democrats win House and Senate. Democrats clinched majorities in both the House and Senate in yesterday’s midterm elections, though the final seat counts remain unknown as some states are still counting votes. In the months ahead, markets will watch for signs of reduced deficit spending, as a divided government may limit large-scale fiscal expansion. The new Senate majority is also likely to shield the Fed’s independence, as it will be harder for President Trump to seat nominees to the Board of Governors who share his preference for lower interest rates. Despite pre-election concerns that the US would resume strikes on Iran, oil prices fell on reduced expectations of further escalation.
Services growth eases to slowest pace in months. Services growth softened in October, with ISM Services PMI falling to 54.5 from 54.9 in September, missing the 54.7 expected and posting its weakest reading in three months. The reading above 50 still signals expansion and marks the 28th consecutive month of growth for the services sector. New orders drove the slowdown, falling to 55.9 from 59.8 in September and missing expectations of 58.5. Fifteen industries reported expansion, while construction, and health care and social assistance reported contractions. Steve Miller, chair of the ISM Services Business Survey Committee, commented that “tariffs and fuel cost impacts continued to be the most-cited issues impacting respondents’ supply chains.”
