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Wall Street wants a Clinton win, so where's the rally?

North Carolina's huge financial loss from hurricane flooding, and other MoneyWatch headlines 01:08

While the third presidential debate is on Wednesday and Election Day still weeks away, Wall Street is already declaring a winner: With polls widening, Democratic nominee Hillary Clinton is far and away the most likely victor.  

The latest CBS News poll has her 11 points ahead of GOP rival Donald Trump in a two-way match-up. The Real Clear Politics average has Clinton’s support back up at levels not seen since April.

Since she’s widely considered the “status quo” nominee, unlikely to rattle global trade and financial markets like Trump would, it’s a little odd that stocks aren’t responding more joyfully. Indeed, the Dow Jones industrials index continues to languish just above the 18,000 level -- trapped in a two-month consolidation range.

Two main concerns are bothering investors.

Mylan CEO faces backlash over EpiPen prices 02:01

First, while Clinton may be status quo, she’s carrying her own set of desired policy changes. Stock investors are focusing on her calls for increased regulation and oversight of drug prices and increased regulation of the fossil fuel industry. For now, the effect can be seen the clearest in health care stocks -- especially drugmakers -- because energy names are being pushed and pulled by headlines of a possible OPEC supply freeze deal.

Clinton’s plans to control drug prices, spurred by the backlash over EpiPen pricing by Mylan Pharmaceuticals (MYL) back in August, seek to increase competition by easing the approval of generic and “biologic” alternatives, prohibiting “pay for delay” arrangements and allowing the import of drugs from overseas.

As you can imagine, this won’t be good news for drug industry profitability. So it’s not surprising that the Health Care Select SPDR (XLV) has dropped more than 8.3 percent from its August high back to its June level. Or that the iShares Biotechnology ETF (IBB) has lost more than 11.5 percent since the end of September.

Second, the Federal Reserve seems to be champing at the bit to raise interest rates after the election. Should Clinton win, stocks are likely to take the result in stride, which would help give the Fed the confidence it needs to pull the trigger on another rate hike.

The current futures market odds of another rate increase before year-end held near 70 percent on Monday, thanks to some hawkish commentary from several Fed officials. Vice-chair Stanley Fischer warned persistently low rates could threaten financial stability, encourage excess risk-taking and hurt banks by pinching net interest margins.

This despite some tepid economic data. For instance, industrial production remained weak, continuing a run of year-over-year declines going back to 2015, as the factory sector remains moribund. Case in point, Ford (F) announced it was shutting four auto plants next week to align production with softening demand and bloated inventories.

So while Wall Street seems to be getting what it wants as Clinton closes in on an electoral victory, it may not be enough of a push to invigorate bullish sentiment given these countervailing headwinds.

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