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U.S. stocks close higher on Election Day 2018

Key issues in the midterm elections
Key issues in the midterm elections 05:14

U.S. stocks closed higher Tuesday as industrial and technology companies recovered some of the big losses they took in October. Strong earnings also contributed to the gains.

The S&P 500 index closed .6 percent higher, at 2,755.  The Dow Jones Industrial Average gained 173 points, or 0.7 percent, to close at 25,635. The Nasdaq composite picked up 47 points, closing at 7,375.

CVS Health jumped 5.7 percent and Booking Holdings, the parent company of, rose 4.2 percent. Energy companies traded lower as the price of oil continue to fall, extending four weeks of losses.

After the worst October in six years, stock markets have calmed over the last few days as traders wait for results from the midterm elections. At stake is control of the House of Representatives and Senate, along with 36 governorships.

Stocks tend to fall before midterm elections and then rally once the voting is over. Over the last half-century, the S&P 500 has generated an average return of 16 percent in the year following a midterm election, according to Capital Economics.

Some of the most dramatic reactions to the elections might be seen in the health care sector, as Republicans could make another attempt to eliminate the 2010 Affordable care Act if they keep control of the House and Senate. "If the Democrats take the House, the Affordable Care Act is not under threat of being repealed," Alicia Levine, chief market strategist at BNY Mellon Investment Management, told the Associated Press. "If we see the Democrats take the governors houses, you could also see the expansion of Medicaid."

A Democratic House majority might work with the administration to try to reduce drug prices, and would take a more lenient approach on food stamp benefits. That could help big-box stores and grocery chains, which get a lot of revenue from those programs.

If Republicans keep control of the House, Levine said, they might index capital gains taxes to inflation, which would effectively cut those taxes. While that could boost the economy, it would also encourage the Federal Reserve to keep raising interest rates at a faster pace, and investors are already concerned that rates could rise too fast.

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