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Republicans take congress

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In a sweeping victory for President Bush, the GOP retained control of the House and took back the Senate. The president's party typically loses seats in midterm elections.

The White House can now use its newfound clout to push for issues on its agenda that will affect the economy, such as permanent tax cuts.

Stock futures built gains as election results came in and trade higher this morning. S&P futures (sp02z) trade higher by 4.5 points at 918.50. NASDAQ futures (nd02z) are up 5 points at 1,056.50, while Dow futures (dj02z) are gaining 57 points at 8,705.

Fair value for the S&P 500 today is $0.23. That price will not change during the session. HL Camp & Company has their computers set for program buying at $1.20 and set for program selling at $-2.08. Fair value for the NASDAQ-100 today is $2.00.

An overwhelming majority of economists expect the Fed to nudge rates lower and take the fed funds target to a fresh 40-year low of 1.50% from its current 1.75% later today.

The central bank last cut rates in December 2001, capping an aggressive ease campaign that saw the overnight rate slashed 11 times. The first cut arrived in January 2001 in an inter-meeting when the fed funds rate sat at 6.50%.

The FOMC meeting begins at 9:00 a.m. and an announcement typically hits the wires at around 2:15 p.m.

Markets, which had until recently expected the Fed to stand pat, began pricing in another rate cut as piece after price of economic news revealed stubborn weakness in the economy and sliding consumer confidence.

With job creation stagnating and a potential war with Iraq hanging over consumers' heads, market watchers feel that more monetary stimulus, even a mere 1/4 point cut, could inject some confidence into the American psyche.

The soft economy has likely increased the pressure to slice rates within the Federal Open Market Committee as well. At the September 24 gathering, when the central bank left rates unchanged, Gov. Edward Gramlich and Dallas Fed President Robert D. McTeer dissented in favor of a cut. It was the first time a governor had dissented since 1995.

Treasury bonds extended their losing streak to four straight sessions.

Selling pressures are a factor for the long end with a 10-year note auction on tap Wednesday and investors sill absorbing yesterday's 5-year note sale.

The 10-year Treasury note receded 10/32 to yield ($TNX.X) 4.127% while the 30-year government bond fell 21/32 to yield ($TYX.X) 5.12%.

No economic data is on Wednesday's agenda. The Fed's meeting is the meat and potatoes of the trading session.

In the currency sector, the dollar strengthened modestly after trading lower yesterday. The buck rose 0.3 percent to 122.45 yen while the euro declined 0.3 percent to 99.48 cents. Both the European Central Bank and the Bank of England will meet to decide on short-term rates tomorrow.

SEC Chairman Pitt resigns

Last night when election results were favoring Republicans, embattled SEC Chairman Harvey Pitt resigned, sending the White House back to the drawing board to find someone who can lead its efforts to restore investor confidence.

Mr. Pitt tendered his resignation yesterday afternoon in a letter to President Bush.

"The turmoil surrounding my chairmanship and the agency makes it very difficult for the commissioners and dedicated SEC staffers to perform their critical assignments," Pitt wrote in the letter. "Rather than be a burden to you or the agency, I feel it is in everyone's best interest if I step aside now to allow the agency to continue the important efforts we have started."

Pitt was not the Bush administration's top choice to run the SEC in the first place. A leading candidate may be former New York Mayor Rudy Giuliani. Previous names considered by the White House included SEC commissioner Joseph Grundfest and William Steere Jr., formerly chairman of Pfizer.

Stock watch

Bellwether tech stock Cisco Systems (NASDAQ:CSCO) $12.69 is the fourth most active in pre-market trading at $13.03 ahead of earnings scheduled for release after today's close of trading.

Brocade Communications (NASDAQ:BRCD) $7.41 is the most actively traded stock in the pre-market, falling 91 cents, or 12%, to $6.50 after Deutsche Bank downgraded the data storage company following the announcement that it would buy privately-held Rhapsody Networks.

In other overnight news, the Wall Street Journal is reporting that the Securities and Exchange Commission notified Goldman Sachs Group (NYSE:GS) $76.74 and JP Morgan Chase (NYSE:JPM) $22.47 that it recommended filing civil securities-fraud and market-manipulation charges against the firms for directing IPO shares to clients who intended to buy more shares in a practice known as "laddering."

Meanwhile, Goldman tacked on 26 cents to $77 and J.P. Morgan Chase rose $1.01 to $23.48 over Redibook.

Jeff Bailey

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