Posted By: Margaret Pozzini
By Ellis MnyanduWed Nov 8, 7:51 AM ET
NEW YORK (Reuters) - U.S. stock futures pointed to a
sharply lower start on Wall Street on Wednesday after Democrats
swept Republicans from power in the U.S. House of
Representatives and moved to the brink of taking the Senate.
ADVERTISEMENT
if (window.yzq_a == null) document.write("");if (window.yzq_a)
{
yzq_a('p', 'P=SBTbwULaS.YTM.8RP8NXCwdOSDRIwkVTH9YAAA0F&T=1cbkerrla%2fX%3d1163075542%2fE%3d7665819%2fR%3dnews%2fK%3d5%2fV%3d1.1%2fW%3d8%2fY%3dYAHOO%2fF%3d2974394760%2fH%3dY2FjaGVoaW50PSJuZXdzIiBjb250ZW50PSJzdG9jaztmdXR1cmVzO0hvdXNlO2ludmVzdG1lbnQ7ZWxlY3Rpb247RGVtb2NyYXQ7UmVwdWJsaWNhbjtpbnRlcmVzdCByYXRlcztOYXNkYXE7RGVtb2NyYXRpYztob3VzZTtGYW5uaWUgTWFlO21vcnRnYWdlO2ZpbmFuY2U7aG9tZTtpdDtOZXR3b3JrO0Npc2NvIFN5c3RlbXM7IiByZWZ1cmw9IiIgdG9waWNzPSIi%2fS%3d1%2fJ%3d96A949D1');
yzq_a('a', '&U=13auojf2m%2fN%3d4zTdBEJe5tg-%2fC%3d557585.9452445.10283169.1442997%2fD%3dLREC%2fB%3d4097186');
}
With control of the U.S. Senate yet to be decided,
investors could decide to sell stocks following a strong run-up
in anticipation of gridlock in Congress rather than the wider
sweep garnered by the Democrats.
"Not only is the market going to be taken by surprise on
the outcome, but the uncertainty about the Senate race could
create even more volatility," said Paul Mendelsohn, chief
investment strategist at Windham Financial Services in
Charlotte, Vermont.
A potential recount and possible legal challenges in
Virginia could delay the final result, dredging up memories of
the 2000 presidential election recount that lasted five weeks.
"Given the state of the overbought condition of the market
here, the market could take these results as an excuse to
really sell off sharply here. Things could get a little ugly in
ways we didn't expect or foresee," Mendelsohn added.
Virginia Democrat James Webb had an 8,000-vote advantage
over Republican Sen. George Allen (news, bio, voting record) out of more than 2 million
cast. A recount could stretch into December, leaving Senate
control uncertain.
S&P 500 futures were down 6.8 points, below fair
value, a formula that evaluates pricing by taking into account
interest rates, dividends and time to expiration on the
contract.
Dow Jones industrial average futures dropped 42
points and Nasdaq 100 futures fell 8.75 points.
Analysts said sectors likely to be under pressure from a
Democratic sweep included defense, tobacco and pharmaceuticals.
Shares of Pfizer Inc. (NYSE:PFE - news) were down nearly 2 percent in
Europe, while Merck & Co (NYSE:MRK - news) slid 2.3 percent.
On the other hand, a Democratic majority in either house of
Congress would likely derail legislation aimed at reining in
Fannie Mae (NYSE:FNM - news) and Freddie Mac (NYSE:FRE - news) because Democrats
are expected to be more concerned about preserving the roles
the top two mortgage finance companies play in making home
homeownership affordable.
U.S. stocks rallied for two days before the election, with
the Dow Jones industrial average (^DJI - news) on Tuesday reaching an
all-time intraday high of 12,196.32 and the Nasdaq Composite
(^IXIC - news) rising as high as 2,391.34, its highest since February
2001.
Stocks to watch include Hovnanian Enterprises Inc. (NYSE:HOV - news)
after the homebuilder forecast late on Tuesday it would report
a fourth-quarter net loss and 2006 profit at the lower end of
its prior outlook, citing land-related charges.
National Semiconductor Corp. (NYSE:NSM - news), a maker of analog and
power management chips, cut its second quarter revenue forecast
after the bell on Tuesday, citing weaker-than-expected demand
from mobile telephone makers.
Network equipment maker Cisco Systems Inc. (Nasdaq:CSCO - news) is
scheduled to report quarterly results after the closing bell.
The information reported above is property of Yahoo! inc. and reprinted or modified with legitimate permission.