Gridlock Relief Sparks a Post-Election Rally

Grant Calloway

Welcome to the Bull Sheet podcast. Yesterday we asked how Wall Street was pricing the midterms. Well, the voters answered, and the tape is answering back. Democrats took both the House and the Senate, futures dipped overnight as the results rolled in, and then they turned around hard. Nasdaq 100 futures bounced more than 900 points off their overnight low, which was their lowest since July 30, per CNBC. That's not a bounce. That's a U-turn.

Grant Calloway

Here's the headline. The market hates uncertainty more than it hates any party. A decisive result, plus President Trump telling the New York Times he's absolutely willing to accept it, and telling the Wall Street Journal he and Republicans would work with Democrats, took the contested-election tail risk off the table. As of early trade, the Dow was up somewhere between 1,000 and 1,200 points, roughly 2 to 2.4 percent. The S&P 500 was up between about 1.1 and 1.7 percent, and the Nasdaq between 1.1 and 2.1. Ranges, because the tape is moving while I talk.

Grant Calloway

Jay Woods at Freedom Capital Markets put it plainly: still more uncertainty looms, but there will be gridlock, and historically that's good for the market. Andrew Slimmon at Morgan Stanley Investment Management said markets like gridlock, they don't like a party with too much power. I've been around long enough to know that's a folksy truth with a lot of scar tissue behind it.

Grant Calloway

Now the tape. Bonds are bid. The 10 year yield is down about 4 basis points near 4.91 percent, the 2 year is near 4.59, and the 30 year is around 5.29. Lower yields because gridlock makes big fiscal expansion harder, as Deutsche Bank analysts noted. The dollar is softer. Euro dollar is around 1.126, sterling around 1.35. Crude is lower, WTI down somewhere between 1 and 3 percent, near 95 dollars a barrel, Brent near 102. Gold jumped nearly 3 percent to around 4,050 an ounce, and silver climbed about 4.5 percent past 52. Bitcoin is near 78,000, up less than 1 percent, and Ether is up about 1.4 percent near 2,300.

Grant Calloway

Overseas, Europe opened green. The Stoxx 600 was up about 0.4 percent early, led by banks, and renewables were screaming. Orsted jumped over 7 percent and Vestas about 5, on hopes of a U.S. policy shift.

Grant Calloway

Movers, and notice this is not a tech show this morning. Health care first. CVS plans to split into two public companies, separating retail pharmacy from the Aetna and Caremark side, and reported third quarter adjusted earnings of 2.09 a share against 1.62 expected. Managed care also caught a bid on the election: Molina up about 6 percent, Centene about 5, HCA about 7. Novo Nordisk raised its outlook as the Wegovy pill beat estimates, shares up as much as 6 percent. Energy side: the Invesco Solar ETF is up about 9 percent and First Solar around 8.5. Industrials: Emerson beat on adjusted earnings of 1.86, orders up 14 percent underlying, and raised its dividend 7 percent. Consumer: McDonald's is up about 2 percent on mixed results, earnings of 3.57 beat 3.38, revenue of 7.16 billion missed. Kraft Heinz beat and is selling its North American coffee business for 650 million. The staples ETF, XLP, hit an all-time high. And HP named Emma Walmsley CEO.

Grant Calloway

A quick word from our sponsor. Jellypod turns your sources into a podcast, just like the one you're hearing. Head to jellypod.com. Now, back to the floor.

Grant Calloway

Time for Bull versus Bear. The bull reads it like this. Divided government means gridlock, and gridlock means less room for extreme tariff escalation or reckless deficits. Trump's conciliatory tone removes the ugliest tail risk. Yields are sliding back under 5 percent on the 10 year, and the rally is broadening into banks, staples, health care, and value, not just the usual suspects. That is a healthier tape.

Grant Calloway

The bear says hold on. A Democratic Congress, plus a state like Texas flipping, threatens the AI buildout. Gina Hinojosa won the governor's race pledging an immediate data center moratorium, and CoreWeave is down 4 to 8 percent, Nebius and Iren are lower, and Tesla and SpaceX are each off about 5 percent. And the macro backdrop hasn't changed overnight. Yields near 5 percent, oil near 95 with an Iran conflict, and sticky living costs. Gridlock doesn't fix inflation.

Grant Calloway

Where do I land? Both are right about different drawers in the same cabinet. The bull wins the first day, because certainty is a drug and the tape just took a dose. But the bear owns the longer question. Gold up 3 percent on the same morning stocks rip tells you somebody's still hedging. I'd call this relief, not resolution. And relief rallies have a way of testing whether they're built on rock or on sand.

Grant Calloway

On deck. At 8:30 Eastern, September trade balance, expected near a deficit of 105.6 billion. At 10:00, the ISM Services Index, consensus around 54.7. Already out: ADP showed 86,000 private jobs in October, ahead of the 75,000 estimate, and mortgage applications rose 3.4 percent. Earnings before the open: CVS, McDonald's, Novo, Emerson, Kraft Heinz, Uber, and Datadog. After the close: Qualcomm, AppLovin, AMC, and Coherent.

Grant Calloway

What matters most today is whether this rally holds after the opening bell, that greatest four hundred milliseconds in capitalism, and whether the buyers show up beyond the first hour. Tune in tomorrow at 7 Pacific. And a quick reminder: this podcast is for educational purposes only and is not investment advice.