Wall Street set to rise as investors take split Congress in stride

By Sruthi Shankar

(Reuters) - U.S. stocks were on course to open higher on Wednesday after the midterm elections handed Democrats the House of Representatives and saw Republicans reinforce their control of the Senate in a widely expected outcome.

After an initial muted market reaction globally, futures for the three major Wall Street indexes powered higher along with global stocks, while the dollar fell on fading hopes of further fiscal stimulus.

A Democrat-controlled House will hamper President Donald Trump's pro-business agenda, but few worry about a reversal in already-enforced corporate tax cuts and deregulation measures that have played a large hand in the U.S. market's rally since the 2016 election.

The results for the Republicans were no worse than feared and pointed to a political gridlock that was largely expected by investors, leaving them free to buy back into a market that had its worst month in seven years in October.

"A lot of what was holding the market back was fear of what might happen, and the fact that it's over now will eliminate a lot of it," said Brad McMillan, chief investment officer for Commonwealth Financial in Waltham, Massachusetts.

"I don't think the markets were expecting more in the way of future policy action. They are more relieved that anything negative is likely to be a burden."

At 8:36 a.m. ET, Dow e-minis were up 165 points, or 0.64 percent. S&P 500 e-minis were up 20.75 points, or 0.75 percent and Nasdaq 100 e-minis were up 70 points, or 1 percent.

In a sign of appetite for risk, shares of high-growth technology and internet stocks, including Apple Inc and Amazon.com Inc, rose more than 1 percent in premarket trading.

Following a steep selloff in October, the S&P 500 remains down more than 5 percent from its record high, with many investors worried the market could fall further as inflation gathers steam and the Federal Reserve raises interest rates.

The Fed starts its two-day monetary policy meeting on Wednesday, where it is expected to keep interest rates unchanged, but a rate hike in December is largely priced in.

"The policy path implied by this outcome shifts the narrative away from rising rates at least temporarily," Morgan Stanley's Michael Zezas wrote in a client note.

"In the near term, that could alleviate the pressure that stocks have felt in recent weeks."

Investors are also focused on healthcare stocks, one of the best performing S&P sectors this year, with the election results seen as reducing the chances of legislative action to cut medical costs.

Colorado voters rejected a measure calling for greater distances between drilling projects and public spaces, which spurred shares of companies operating in the state.

Anadarko Petroleum Corp surged 7 percent, while Noble Energy Inc jumped 8 percent, making them the top two gainers among S&P companies trading premarket.

(Reporting by Sruthi Shankar and Noel Randewich in San Fransisco; editing by Arun Koyyur)