At about 2 a.m. Eastern time, President Donald Trump and Democratic challenger Joe Biden were locked in tight races in battleground states. Most polls had predicted a Biden victory.
Many investors took forecasts of a so-called “blue wave” of Democratic Party wins as a signal that the U.S. economy might soon get a big, fresh infusion of help. But with the race too close to call, analysts said they also might be reassured by the prospect for a continuation of Trump’s pro-market stance.
“Markets seem to be pricing in better chances for Trump, or at least a smaller chance of a blue wave,” Stephen Innes of Axi said in a commentary.
“On the one hand with the fiscal implications of a Biden win/blue wave that’s a bit of a surprise -– on the other Trump is widely considered more market-friendly, so one can see how it nets out a small positive,” Innes said.
Dow futures were up 0.3% and the S&P 500 futures rose 0.8%. Both initially fell as election returns began coming in. The Nasdaq future contract rose 2.3%. The gains in the futures followed a strong performance in regular trading Tuesday.
In Asia, the Nikkei 225 in Tokyo advanced 1.7% to 23,695.23 on Wednesday, while the Kospi in Seoul added 0.6%, to 2,357.17. India’s Sensex surged 0.9% and the S&P/ASX 200 in Sydney lost 0.1% to 6,062.10.
The Hang Seng in Hong Kong rose 0.3% to 25,019.04, while the Shanghai Composite Index edged 0.1% to 3,273.55.
Investors were considering the implications of a last-minute decision by Chinese regulators to suspend the planned trading debut for shares in Ant Group, the fin-tech affiliate of e-commerce giant Alibaba, after what was expected to be a nearly $35 billion initial public offering.
The decision late Tuesday caused the plans for trading in Shanghai and Hong Kong to be put off due to what the Chinese stock market watchdog said were “major issues” with Ant Group’s regulatory compliance.
Hopes prevailed that the end of a bruising U.S. presidential campaign might lift the uncertainty that’s sent markets spinning recently. By early morning Eastern time, results were still pending for eight states, including Pennsylvania.
The 2016 election rattled world markets as results showed Donald Trump was running ahead of Hillary Clinton. The S&P 500 slumped early the next day, but ended 1.1% higher.
The large number of Americans who voted early means the result of this presidential election might not be known for days. A contested election could inflict still more uncertainty on markets buffeted by bouts of volatility as the coronavirus pandemic has waxed and waned.
Investors are most eager to see a clear winner from this election, even if it takes some time. History shows stocks tend to rise regardless of which party controls the White House.
The makeup of the Senate is another unknown overhanging the markets. Another is the timing of a possible COVID-19 vaccine.
The S&P 500 rose 1.8% to 3,369.16 on Tuesday for a second straight gain. The Dow Jones Industrial Average climbed 2.1%, and the Nasdaq composite added 1.9%.
Shares in sectors that would benefit greatly from an ample support package for the economy, especially if Democrats were to control the Senate, were among the biggest gainers, including smaller companies and industrial businesses.
Investors and economists have been clamoring for a renewal of stimulus since the expiration of the last round of supplemental benefits for laid-off workers and other support approved earlier by Congress.
If Trump wins and the Senate stays under Republican control there would likely be less stimulus than under a Democratic sweep, said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. A Biden win and Republican Senate would mean the lowest chance for stimulus.
But investors see cause for optimism in other scenarios, too. A Trump victory would likely mean a continuation of lower tax rates and lighter regulation on businesses, buoying the corporate profits that are the lifeblood of the stock market.
Many professional investors say what matters most is what happens with the pandemic and whether a vaccine can arrive soon to help the economy heal.
Apart from the election, investors are awaiting the Federal Reserve’s decision on its interest-rate policy on Thursday. Its earlier moves to slash interest rates to record lows and to step forcefully into bond markets to push prices higher have helped Wall Street soar since March.
The Labor Department is also releasing its jobs report for October on Friday, where economists expect to see another slowdown in growth. Meanwhile, corporate earnings reports are showing lower profits in the last quarter, but not as miserable as Wall Street had feared.
In other trading, U.S. benchmark crude oil gained $1.01 to $38.67 per barrel in electronic trading on the New York Mercantile Exchange. It picked up 85 cents to $37.66 on Tuesday. Brent crude, the international standard, gained $1.03 to $40.71 per barrel.
The dollar bought 104.94 Japanese yen, up from 104.95 late Tuesday. The euro weakened to $1.1657 from $1.1718.
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