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What you need to know in markets on Wednesday

Heidi Chung

As the widely-followed U.S. midterm election finally comes to a close, both Wall Street and investors will be focused on how the markets react Wednesday on the back of the final results.

Regardless of the outcome, the stock market has generally seen positive returns in the 12 months following midterm elections, according to John Lynch, LPL Financial’s chief investment strategist. “When it comes to stock market performance, we would argue that election outcomes are not particularly important. Regardless of the election’s outcome, the S&P 500 Index has been positive during the 12 months following the midterm election 18 straight times going back to 1946,” he said in a note on Tuesday.

The most likely outcome of Democrats taking control of the House of Representatives and the Republicans holding onto a slim majority in the Senate will likely create a “government gridlock” situation where it becomes difficult to advance any legislation through Congress, Barclays analyst Aroop Chatterjee said in a note to clients.

Nevertheless, Lynch argues that despite negative connotations surrounding government gridlock, there isn’t much to worry about when it comes to stock market performance.“While many think gridlock is good because it generally takes political extremes off the table, stocks have staged a relief rally of sorts after elections regardless of the results. No matter who controls the House and Senate for the next two years, we think stocks are a good bet to move higher over the balance of 2018 and probably through 2019 as well.”

The economic calendar

On the economic data front on Wednesday, the Mortgage Bankers Association will be releasing their weekly mortgage application data for the week ending in November 2.

Some notable earnings releases expected Wednesday include 21st Century Fox (FOXA), Michael Kors (KORS) before the market open and Qualcomm (QCOM), Wynn Resorts (WYNN), TripAdvisor (TRIP) and Take-Two Interactive (TTWO) after the market close.

During Tuesday’s trading session, the S&P 500 (^GSPC) rose 0.63%, or 17.22 points. The Dow (^DJI) advanced 0.69%, or 175.21 points to its highest closing price in three weeks. The Nasdaq (^IXIC) rose 0.64%, or 47.11 points.

Voting sign is seen outside The Rock Dam Rod and Gun Club, which serves as the polling place for 96 voters during the midterm election, in Foster Township, Wisconsin, U.S. November 6, 2018. REUTERS/Nick Oxford

Here’s what caught Yahoo Finance’s markets correspondent Myles Udland’s attention today

Americans continue to quit their jobs in droves

In September, 3.6 million people quit their jobs, just below the record high 3.65 million job quitters we saw in August. The overall quits rate for the private sector in September held at 2.4% for the third month in a row, matching a 17-year high.

Quits are seen a positive economic indicator, with the thinking being that folks won’t leave a job unless they are reasonably confident they could easily get another one.

With the unemployment rate currently at 3.7% and the economy continuing to create in excess of 200,000 jobs per month, the headline data about the labor market suggests things are very good for American workers right now. The quits data add more depth to that assertion.

Looking below the headline quits numbers and the picture gets even better. And portends more wage growth.

Matt Busigin, a portfolio manager at New River Investments, noted Tuesday that the number of quits in the accommodation and food services industry hit a record high of 709,000 in September. As a percent of people employed in the industry the quits rate hit 5.1% in September, its highest level since November 2007.

And if you track non-supervisory wage growth alongside the quits rate in the food services business, you get a pretty good sense of where wages are going — up. In October, average hourly earnings for all employees rose 3.1% and for non-supervisory workers wages rose 3.2% over last year. These were the highest readings since the spring of 2009, when wages were on the way down as the post-crisis recession deepened.

For years, economists have said that wage growth was the missing element of the post-crisis recovery. But now, wage growth appears to be here. The question then is what’s next?


Heidi Chung is a reporter for Yahoo Finance. Follow her on Twitter: @heidi_chung.

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