Wall Street eyes Midterm election rally as Fed decision and big tech earnings loom

Wall Street investors are anticipating a potential rally ahead of the midterms, as historical data suggests the S&P 500 tends to rise during the eight trading sessions leading up to the US midterm elections. Since 1950, the index has performed well in 18 out of the 19 midterm years, with the median gain reaching nearly 3% in the period starting five trading sessions before Election Day and ending three sessions after it.

This year's window commences on October 27 and concludes on November 6. Historically, this period has outperformed other eight-session stretches during midterm years. However, several factors could impact the market's performance. Investors are awaiting the Federal Reserve's interest-rate decision on Wednesday, earnings reports from Microsoft and Alphabet, and the US October jobs report.

Additionally, rising oil prices and bond yields are adding pressure to the market, potentially undermining the positive historical trends. Despite these risks, the historical record indicates that the stock market has never fallen in the 12 months following October 31 of a US midterm election year, with a remarkable success rate of 19 out of 19 since 1950.