Dow rises to start the week as investors await midterm elections and inflation

The Dow Jones Industrial Average rose Monday as a packed week kicked off, with congressional midterm elections and key inflation data on deck over the next few days.

The Dow traded higher by 123 points, or 0.4%, while the S&P 500 gained 0.2%. The Nasdaq Composite was little changed.

Shares of Apple fell more than 1% after the tech company said iPhone production has been temporarily reduced because of Covid-19 restrictions in China. Shares of Palantir declined more than 5% after missing earnings forecasts.

Meanwhile, shares of Facebook parent Meta gained more than 3% following a Wall Street Journal report that said the company could start layoffs as soon as Wednesday.

Tuesday’s midterm election will determine which party will control Congress, and impact the direction of future spending. Democrats currently control the House, and have a majority in the Senate. According to RBC’s Lori Calvasina, investors could approve of a potential gridlock that may come out of the midterm elections as a Democratic president, with a Republican or split Congress, has historically meant above-average gains.

“[The] conventional wisdom that the stock market likes political gridlock is supported by the historical data in this instance,” Calvasina wrote in a Monday note.

On the economic front, investors are anticipating Thursday’s CPI report will give further insight into the Federal Reserve’s efforts to squash inflation. A hot inflation report could signal to investors that a pivot from higher interest rates, for longer, could be further away than expected.

“[In] order for the equity and bond markets to match the post-peak inflation performance noted in the table, inflation needs to keep coming down — and at a faster pace than we’ve yet seen. Until the Fed signals the ‘pivot’ is near, things could remain challenging,” Baird’s Ross Mayfield wrote in a recent note.

Elsewhere, several companies are expected to report Monday including Activision Blizzard, Lyft and Take-Two Interactive. Corporate earnings season is winding down with a majority of companies in the S&P 500 having reported results.