GOP triumph? Stocks are waiting for the Fed

NEW YORK (CNNMoney.com) -- U.S. stock markets prepared for a busy Wednesday, after a big Republican victory in the midterm election and ahead of a key Federal Reserve meeting.

Dow Jones industrial average (INDU), S&P 500 (SPX) and Nasdaq (COMP) futures were up slightly ahead of the opening bell. Futures measure current index values against perceived future performance.

Stocks closed higher Tuesday after interest rate hikes from the central banks of Australia and India sparked an early rally. But the market traded in a narrow range for most of the day as investors remained cautious amid key political and monetary events this week.

As expected, the midterm elections resulted in big gains for the Republican party, which won control of the House by capturing at least 60 seats.

In the Senate, the GOP gained at least six seats, leaving the Democrats with a slim majority. Two seats remained undecided.

"We got what we thought we were going to get," said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams as futures hovered just above breakeven. "We're not going to see much of a [market] reaction because this was priced in to happen as it did."

The shifting balance of power on Capitol Hill is largely seen as a positive for Wall Street, since Republican lawmakers are viewed as more business friendly and fiscally conservative than their Democratic rivals.

But investors are still awaiting an announcement from the Federal Reserve, which will conclude a two-day policy meeting later Wednesday. The central bank is expected to announce another round of asset purchases when it releases a policy statement at around 2:15 p.m. ET.

"We'll tread water until the Fed announcement and the fireworks will begin at 2:15," said Donald Selkin, chief market strategist at National Securities, of the muted reaction on Wall Street.

The Fed policy, known as quantitative easing, is designed to put downward pressure on interest rates and pump money into the economy. It is also seen as a way for the Fed to combat deflation, a debilitating cycle of falling prices and demand.

While the details of the asset purchases remain unknown, many market participants expect the Fed to buy a total of $500 billion worth of Treasuries in $100 billion monthly increments.

The S&P has risen 11% since late August on expectations of another round of stimulus from the Federal Reserve, but stocks have been moving sideways recently as investors awaited the outcome of the election and confirmation from the Fed.

Some analysts warned that the market could be poised for a pullback if these two issues play out as expected.

"It's already anticipated," Selkin said. "The market wanted this result and they got it, now they need something for an encore."

World markets: European stocks were up near midday on news of the election results and in anticipation of the Fed move. Britain's FTSE 100 added 0.2%, the DAX in Germany gained 0.3%, and France's CAC 40 added 0.5%.

Asian markets ended mostly higher. The Hang Seng in Hong Kong gained 2% after Hong Kong launched a gold exchange-traded fund backed by physical gold held in vaults within Hong Kong. Tokyo's Nikkei was up about 0.1% and the Shanghai Composite Index lost 0.5%.

Currencies and commodities: The dollar eased against the euro, Japanese yen and the British pound ahead of the Fed announcement which could further weaken the greenback.

Oil for December delivery gained 98 cents, or more than 1%, to $84.88 a barrel.

Gold futures for December delivery rose $1 to $1,357.90 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury rose, pushing the yield down to 2.56% from 2.59% late Tuesday.

Economy: In addition to the Fed announcement, investors will take in economic reports on the job market, activity in the services sector and factory orders.

A report from Automatic Data Processing, which manages payrolls for 500,000 companies, showed that private-sector employers added 43,000 jobs in October, rebounding from a modest decline in the prior month.

In a separate report, employers announced 37,986 job cuts last month, up 2.2% from September, according to outplacement firm Challenger, Gray & Christmas. But the October number was still well below the year-ago level.

After the opening bell, the Institute for Supply Management's services index is expected to show a modest increase. A government report is expected to show that factory orders improved in September.

Companies: CNNMoney's parent company, Time Warner (TWX, Fortune 500) reported earnings of $1.4 billion and raised its outlook for 2010. Shares of Time Warner were little changed premarket.

AOL (AOL) reported a decline in revenue for the third quarter that exceeded analysts' expectations. The stock edged higher in premarket trading.

CVS Caremark (CVS, Fortune 500) said third-quarter earnings and revenue fell, but the results were in line with expectations. CVS shares were lower before the bell.

Qwest Communications (Q, Fortune 500) posted a loss but beat expectations sending shares up over 1% in the premarket.

Garmin (GRMN) missed estimates thanks to slow sales and cut its forecast for the year. Shares sank in premarket trading.

Health insurer WellPoint (WLP, Fortune 500) posted a third-quarter profit that beat expectations and raised its outlook for the year. Shares of WellPoint edged higher.

Toyota (TM), Ford (F, Fortune 500) and General Motors are among the automakers scheduled to report October sales figures throughout the day.

After the close, News Corp (NWSA) is expected to post results.