Traders work on the trading floor of the New York Stock Exchange.
US stock futures fell Tuesday night as Wall Street watched two runoff elections in Georgia that will determine control of the Senate.
Dow Jones Industrial Average futures fell 72 points, or 0.2%. S&P 500 futures were down 0.5% and Nasdaq 100 futures were down 0.7%.
Republican Senators Kelly Loeffler and David Perdue face Democratic challengers Rev. Raphael Warnock and Jon Ossoff. If both Democrats win, it would mean a 50:50 tie in the upper chamber, with Vice President-elect Kamala Harris as the tiebreaker vote to put the party in control of the Senate. Both races were too close to each other, according to NBC News.
Some on Wall Street fear a Democratically controlled Senate could lead to higher corporate taxes and stricter regulations for businesses, which could weigh on the broader market. However, that outcome could also facilitate the adoption of additional fiscal incentives that could boost the businesses hardest hit by the coronavirus pandemic.
Oppenheimer's John Stoltzfus said in a note Monday that the S&P 500 could suffer a 10% correction if both Democratic candidates win the runoffs.
However, Mark Haefele, CIO at UBS Global Wealth Management believes that even if the Democratic candidates win the runoff election, enforcing extremely progressive legislation is no guarantee.
"The best Democrats can do is have a 50:50 split in the Senate, and their caucus includes some moderates who would not necessarily vote for all of Biden's policy proposals," Haefele said in a note. "Another point to consider is that there will be a mid-term election in 2022 and the sitting president's party usually loses seats in Congress."
"Democrats fear that if they are too aggressive to force their agenda through Congress in a strictly partisan way, they could potentially lose their majority in both houses," he said.
Wall Street had a solid session on Tuesday, with major averages reclaiming some of their heavy losses from the first day of trading on Monday.
The Dow rose 167 points, or 0.6%, on Tuesday. The S&P 500 and Nasdaq Composite gained 0.7% and nearly 1%, respectively. Those gains came as traders bet on the world economy to recover, which boosted crude oil prices and energy names.
"Oil is a function of the rest of the world's recovery and a look at where we are going," Tim Seymour, founder and CIO of Seymour Asset Management, told CNBC's "Fast Money". "We've looked at some of those names that have underperformed over the long term. That's the biggest part of this story."
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