Even though Republicans have swept control of the White House, Senate and House of Representatives, which could give them more leeway to push through their policies, “promises made on the campaign trail may not be implemented immediately, with final legislation likely to be a pared-down version of the original proposals,” according to Solita Marcelli, chief investment officer, Americas, at UBS Global Wealth Management.
Helping to keep Wall Street’s losses in check was The Walt Disney Co., which jumped 7.3 per cent after the entertainment giant reported stronger profit for the latest quarter than analysts expected. CEO Robert Iger credited improved profits at its streaming businesses and strong box-office results for its movies, including “Inside Out 2″ and “Deadpool & Wolverine,” among other things.
Tapestry shares climbed 12.8 per cent after the luxury fashion company said it’s terminating its merger with Capri, another luxury brand owner. The companies agreed to an $8.5 billion deal last year to unite the makers of Coach and Michael Kors handbags, but the tie-up faced numerous challenges, including a lawsuit from the Federal Trade Commission to block the deal on antitrust grounds.
Capri shares rose 5.3 per cent after erasing a morning loss.
Stocks were also feeling the effects of swinging yields in the bond market following the latest update on inflation. Prices paid at the US wholesale level were 2.4 per cent higher in October from a year earlier. That was an acceleration from September’s 1.9 per cent inflation rate and a worse jump than economists expected.
A separate report, meanwhile, suggested the US job market remains solid. Fewer US workers applied for unemployment benefits last week in the latest signal that layoffs aren’t taking off.
Treasury yields initially jumped following the reports, as traders trimmed their expectations a bit for a coming cut to interest rates by the Federal Reserve at its meeting next month. But yields later regressed, and the yield on the 10-year Treasury eased to 4.39 per cent from 4.45 per cent late Wednesday.
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The Fed began cutting rates from their two-decade high in September to offer support for the job market, hoping to keep it humming after bringing inflation nearly all the way down to its target of 2 per cent. Prior forecasts published by the Fed implied it could keep cutting rates through next year.
But Trump’s victory may have scrambled such plans. Economists say his preferences for lower tax rates, higher tariffs and less regulation could ultimately lead to higher US government debt and inflation, along with faster economic growth.
While lower interest rates can give a boost to the economy and to prices for investments, they can also give inflation more fuel.
In stock markets abroad, European indexes were higher, including a 1.4 per cent jump for Germany’s DAX. Asian markets were mixed, meanwhile. Hong Kong’s Hang Seng dropped 2 per cent, but South Korea’s Kospi added 0.1 per cent.
AP
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