US stocks closed sharply higher on Wednesday, logging their third day of gains – as well as the best day for the Nasdaq Composite since April, and the best S&P 500 performance since June.
Even though a delayed election result was heralded as the market’s “nightmare scenario”, the market rallied all day. Experts believe the market is receiving boost from a pricing-in of a potential delay, as well as hopes for a Democratic White House paired with a Republican Senate as that combination would lead to more modest policy.
The votes are still being counted in several key states. But it seems that investors are pricing in the possibility that Joe Biden will win the race for the White House and that Republicans will keep control of the Senate. Stocks are soaring today.
While that outcome is being viewed by some as the dream case — the proverbial gridlock in DC helping Wall Street — one strategist thinks the market is getting it all wrong.
“Biden and a GOP Senate is the worst-case scenario for the markets. It means a large fiscal stimulus deal is unlikely,” said Eric Winograd, a senior economist at AB.
Winograd said that there will now be more pressure to get some sort of stimulus deal done in the lame duck session.
Otherwise, Biden and Republican lawmakers like Senate Majority Leader Mitch McConnell may only be able to agree on a so-called skinny deal that may not move the needle much.
“Biden and McConnell reaching across the aisle seems improbable at best,” Winograd said, adding that he doubts the Federal Reserve can do much more than it already has to prop up the economy.
We don’t yet know who the next President will be, but we do know what economists are expecting for tomorrow’s jobless claims.
Thursday’s report from the Labor Department is expected to show another 732,000 claims for first-time unemployment benefits. That would be some 20,000 fewer claims than in the week before, and not exactly a vast improvement. Nonetheless, any improvement is good news.
Continued jobless claims, which count workers who have applied for benefits for at least two weeks in a row, are expected to come in at 7.2 million, down from 7.8 million in the prior week. As with initial claims, it’s great that fewer people need government benefits to make ends meet – if that’s indeed the reason the number is lower.
But jobless workers have increasingly been rolled onto alternative government benefit programs after exhausting state benefits. Last week’s report showed that 3.7 million people were on the Pandemic Emergency Unemployment Compensation program, for example, which kicks in after regular benefits run out.
These numbers also don’t yet include other Covid-era programs, such as Pandemic Unemployment Assistance, which was created to help workers like the self-employed who aren’t usually eligible for jobless benefits.
Tech stocks are getting all the attention for their monstrous post-election rally – but don’t sleep on health care stocks. The Health Care Select SPDR ETF (XLV) is up more than 5% Wednesday, even better than the tech sector’s 4% gain.
One factor of the spike is big surge for Biogen (BIIB), which soared nearly 40% following good news from the FDA about one of its Alzheimer’s drugs.
But other Big Pharma firms, biotechs, insurers and other major health care firms were also up. Investors seem to be betting that the election outcome could diminish the chances of a “Bidencare” Affordable Care Act expansion getting approved by what could be a Joe Biden presidency and GOP-led Senate.
“The markets still believe Biden will win but what investors didn’t want was a sweep,” said Luis Strohmeier, a partner with Octavia Wealth Advisors.
James Ragan, director of wealth management research for D.A. Davidson, agreed: “Health care is doing well since it should benefit the most from a divided government. There would be less legislation.”
While the election is of course top of mind, it’s an exciting day for CNN Business as our digital live show, “Markets Now,” is back home. The show returned to its old stomping grounds at the New York Stock Exchange for the first time since the coronavirus pandemic began.
Host Alison Kosik moderated today’s show from NYSE for the first time in more than seven months. The last show at the exchange was filmed March 11.
“Markets Now” airs live every Wednesday at 12:45 pm ET.
So we got both no results and a massive stocks rally, even though it’s exactly what investors referred to as the “nightmare scenario” before the election.
Why is this happening?
We’re hitting a sweet spot for the stock market with the likelihood of electing a new president and keeping a conservative Senate, said Mike Novogratz, founder and CEO of Galaxy Digital Holdings on the CNN Business’ digital live show Markets Now.
A divided government would mean the tax hikes expected under a Democratic sweep won’t happen, but new stimulus money will likely still come through.
“I think it’s a bullish sign for markets,” Novogratz said.
This is particularly true for tech stocks, which are rallying strongly today.
“I think there was a real fear that if we were going to get a blue sweep they were going to go after big tech,” he said.
Financial markets are not reacting the way experts thought they would today. Stocks are rallying in spite of the delayed outcome in the presidential race while traditionally safe investments are headed lower.
For example, US Treasury yields, which were up overnight when the market was still betting on a blue wave, have reversed, said Scott Minerd, global chief investment officer at Guggenheim.
But now the market is hoping for a Republican Senate and a Democrat in the White House, and that’s helping markets today, because it will make for moderate policy and “put the brakes on the Green New Deal and a lot of other programs,” Minerd said.
As a result, “six months from now, stocks should be higher than they are today,” he said.
We still don’t have a result for the election, but stocks are rallying anyway.
But the gridlock he refers to isn’t the uncertainty about who will take the White House, but rather the likelihood that the Republican party will keep control of the Senate, while Joe Biden could become the next President.
For the market, this might mean moderate outcomes on the whole, and that’s a positive.
“For the market, the threat of big new tax increases has dissipated,” Valliere said.
Will it be same as it ever was for the tech giants, no matter who wins the election? The political talking heads might still be trying to figure out the election results – but some of the Nasdaq’s top stocks are rallying nonetheless.
The stocks of all five FAANGs – as well as Microsoft (MSFT) – were up between 4% and 8% in midday trading Wednesday. Tesla (TSLA) was not taking part in the post-election rally, with shares trading flat.
It’s been a stunning four years of stock gains for Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), Google owner Alphabet (GOOGL), Microsoft and Tesla.
This magnificent seven of the Nasdaq is now worth about $7.9 trillion combined – even though Trump has often been at odds with Big Tech over issues like immigration, tariffs and the president’s complaints about the growing competitive clout of some of these companies.
Four years ago, this septet had a collective market value of just $2.4 trillion.
This rally just won’t stop. It’s making us wonder what might happen when we finally have a winner of the election…
But for now, we don’t, and the market is on fire.
The Dow briefly climbed more than 800 points. It’s now up some 780 points, or 2.9%.
Meanwhile the S&P 500 is 3.4% higher and the Nasdaq is holding its lead with a 4.4% gain.
The stock market rally is still in full swing at midday. The Dow has now gained more than 700 points, or 2.7%. Phew.
The S&P 500 is up 3.2%, and the Nasdaq is still leading gains with 4.3%.
Experts’ views are divided about why the market is shooting higher. Part of it might be that a delayed election outcome was already priced in, as well as continued odds in favor of a Joe Biden win in the betting markets.
Growth stocks have been doing well under the Trump administration, so another term could serve them well.
Meanwhile, either next administration would likely pass another stimulus bill.
“Overall, investors should stay patient as the vote count continues and recognize that markets may be volatile along the way,” analysts at Columbia Threadneedle Investments?said in a note.
T-Mobile (TMUS) will pay a $200 million fine to the US government after its subsidiary Sprint was caught claiming federal telecom subsidies it wasn’t eligible to receive.??
The fine, announced Wednesday by the Federal Communications Commission, caps an investigation into Sprint’s conduct from before it merged with T-Mobile earlier this year. It is the largest fixed-amount penalty to be paid in FCC history, the agency said.?
The investigation found that Sprint had claimed benefits from the US government’s Lifeline program to help cover the costs of phone and broadband service for as many as 885,000 subscribers. But in fact, those subscribers were not eligible for subsidies under the program because they were considered non-users of Sprint’s service, meaning they had not used the service in at least a month.
The Lifeline program provides eligible low-income households a $9.25 monthly credit through their telecom carriers. The discount may be used to defray the costs of cellphone or home internet service.
Here’s another piece of regularly scheduled programming this morning: services sector data from the Institute for Supply Management.
In October the non-manufacturing (i.e. services) purchasing managers’ index grew for the fifth straight month – but the PMI came in lower than expected, at 56.6 points. It was also lower than in the previous month.
Still, any level over 50 does denote growth in the sector.
The ISM data is based on a survey, and respondents were cautiously optimistic about business conditions and the economy last month – despite uncertainty surrounding the pandemic and the election, as well as capacity and logistical constraints.
Shares of pharmaceuticals maker Biogen (BIIB) jumped more than 27% after the chances of approval for its Alzheimer’s drug aducanumab shot higher based on evidence of effectiveness that the company provided to the Food and Drug Administration.
Trading in Biogen stock was briefly halted for the announcement.
If you blinked you missed it! And no, I don’t mean the election outcome, because that’s still uncertain.
The Dow is now more than 600 points, or 2.3%, up, and the trading day isn’t even an hour old.
The S&P 500 is up 3.1% and the Nasdaq is up 4.1%.
There are still many hours left for trading to go all sorts of haywire, but right now, the only way seem to be up.
About 45 minutes into the trading day, stocks have extended their gains.
The Dow climbed 1.9%, or more than 500 points, while the S&P 500 was up 2.5%.
The Nasdaq continued to lead the field with a 3.6% gain.
Elections are always volatile, but investors shouldn’t forget what else is happening around them: Covid-19 infections are rising, we still don’t have a new stimulus package, and the jobs market recovery is slowing.
“So when the election is finally decided, we have a heck of a lot of challenges to tackle on the way to full recovery,” he said in emailed comments.
America does not yet know who the next President will be – the supposed “nightmare scenario” for the stock market. Yet US stocks nevertheless opened decidedly higher Wednesday morning.
Market analysts believed a delayed election outcome would cause widespread uncertainty, which is typically the enemy of Wall Street. The market isn’t showing signs of panic, though, perhaps because it had already priced in the fact that the election may not be decided anytime soon.
Growth stocks have performed well under the Trump administration and a second term could herald more of the same fruitful environment. At the same time, betting markets are still very clearly favoring Joe Biden to win, which would likely lead to more government stimulus.
Legal betting on sports is coming come to more states after voters in Louisiana, South Dakota and Maryland passed measures to allow such gambling.
Shares of several sports-betting companies spiked in early trading Wednesday: DraftKings (DKNG) and Penn National Gaming (PENN), the casino company that owns a significant stake in Barstool Sports, as well as the London-based shares of Flutter Entertainment which owns FanDuel.
All three stocks have surged this year thanks to strong demand for sports betting once the basketball and hockey playoffs resumed and the baseball season got off to a later start this summer following delays brought about by the coronavirus pandemic.
In a tweet Wednesday morning, DraftKings CEO Jason Robins said he was happy to see that the votes in Maryland and Louisiana appeared to be both “clear” and “decisive.”
Unlike, of course, the outcome of the presidential election.
It’s not only Election Day Week, it’s also jobs week! (Please direct your complaints to the folks who make the schedules.)
As usual, the first jobs data point out of the gate was the ADP Employment Report, and it wasn’t pretty.
America added 365,000 private sector jobs in October, according to ADP. That’s nearly half the 650,000 economists had expected. Ouch. For comparison, 753,000 jobs were added in September.
The services sector added the most jobs, with the leisure and hospitality industries leading the way. After being decimated by the spring lockdown, it’s these areas of the economy that still continue to recover at the fastest pace because they have the most ground to make up.
The ADP report doesn’t predict what the government’s official jobs report will say on Friday, but it gives us an indication of what its flavor might be.
Economists are worried that the labor market won’t be able to continue recovering at the rate it has over the summer. As of last month, the United States was still down 10.7 million jobs from February. Whoever wins the presidential contest will have to work on fixing jobs.
We got about an hour and a half left until the opening bell rings on the New York Stock Exchange and futures are edging higher.
They extended their gains some, with Dow futures up 0.5%, or some 150 points, and futures for the S&P 500 up 1.6%. Nasdaq Composite futures were up a whopping 3.3%.
This isn’t exactly the stock reaction to a delayed election outcome that was expected. Where Wall Street was hoping for certainty – about both a winner and the next round of government stimulus – we got delays. Usually markets hate uncertainty, but today they’re headed higher in the face of just that.
One theory why the market, and particularly the Nasdaq, is up so much, is stocks that saw a rapid rise under the current Trump term could benefit from a second one.
Another theory is that markets are growing more confident that Joe Biden will end up winning. Betting markets are very clearly favoring a Democratic win, with PredictIt showing 80% for Biden.
But one way or another, investors expect volatility until the results are clear.
The outcome of the presidential election may not be clear just yet. But one thing may be certain. Either a President Biden or Trump in a second term may need to continue to rely on executive actions to get things done in Washington.
“If Biden wins, he will have a tough time passing a lot of things that will require legislation,” said John Vail, chief global strategist at Nikko Asset Management. “But he’ll still have the executive orders. It could get unruly and messy.”
Trade deals will be a major focus. If Biden does wind up as the next president, he could use some executive orders to strike new deals with other nations in order to try and restore some of the fractured relationships with allies and trade partners created by Trump.
“Executive orders will be big issue, especially on the trade front. Biden would want a more multilateral approach,” said Rich Steinberg, chief market strategist with The Colony Group.
Even though we don’t know who has won the election yet, we’re back to business as usual in some parts of Washington: The Federal Reserve is kicking off its two-day monetary policy meeting today and will announce its updates tomorrow at 2 pm ET.
Fed Chairman Jerome Powell will hold a press conference at 2:30 pm ET. Usually, the Fed meets on Tuesday and Wednesdays, but the meeting was rescheduled due to Election Day.
Odds are not much will change policy-wise. The Fed slashed interest rates to zero in the wake of the pandemic in March and has since committed to leaving them there for years to come.
One thing is for sure, however, Powell will get lots of questions about the election during the press conference, and he’ll probably answer very few of them.
Though a nominee of President Donald Trump, Powell has been under fire from the administration. Trump repeatedly attacked Powell while the central bank was raising interest rates before the pandemic when the economy was healthy.
Powell has said again and again that more fiscal and monetary stimulus is needed to get the economy through this crisis. On Friday, the central bank lowered the minimum loan sizes of its Main Street Lending Facility, to make the loans more accessible to smaller businesses.
Wendy’s (WEN) just reported its best global same-store sales in 15 years, partially because of its recently launched breakfast menu.
The fast food chain said in its third-quarter earnings report that US same-store sales grew 7%, slightly above analysts’ expectations. Revenue was $452.2 million, an increase 3% year over year.
The increase in revenue was “driven by an increase in same-restaurant sales which benefited from the positive impact of the company’s new breakfast daypart in the US,” CEO Todd Penegor?said in a release.
Wendy’s stock is flat in premarket trading.
Uber, Lyft and other gig economy companies are breathing a sigh of relief. California voters passed Proposition 22 Tuesday, a move that will let the ridesharing companies continue to classify drivers as independent contractors and not as employees that would be eligible for many benefits.
Shares of Uber (UBER) surged 10% in early trading Wednesday while Lyft (LYFT) was up nearly 15%. The stocks had rallied in recent days on hopes that Prop 22 would pass.
The ridesharing giants, along with fellow gig economy companies DoorDash, Instacart and Uber-owned Postmates, spent more than $185 million lobbying for Prop 22. That made the issue the most expensive ballot measure ever in California. But some Uber drivers have filed a lawsuit, claiming that there was pressure on them to vote in favor of Prop 22. ?
The outcome of the presidential election is still not clear. But no matter who wins, it appears that a blue wave scenario may not be in the cards. The battle for control of the Senate is still up in the air and there are some close races in the House as well.
What does that mean for the markets? It’s been a bumpy morning of premarket trading, but Dow and S&P 500 futures weren’t pointing to any dramatic moves. Tech stocks continue to rally, though.
Investors are mostly taking the news in stride. It appears that neither Democrats nor Republicans will have a clear mandate, which could mean more compromise.
“There wasn’t a blue wave. We might get some tax increases but they won’t be severe. And tech companies will still do well regardless of who’s president,” said Ken?Van?Leeuwen, managing director and founder at?Van Leeuwen & Company.
Van Leeuwen added that he still thinks Congress and the president will eventually move past the election rancor and approve more Covid-19 financial aid for struggling consumers and businesses.
“We’re going to get stimulus…with or without Trump,” he said.
US stock futures swung wildly early Wednesday as the prospects of a quick, decisive result to the election faded?and President Donald Trump made baseless claims about the vote, leaving investors on edge.
Dow?(INDU)?futures had plunged more than 400 points, or 1.5%, after Trump prematurely claimed victory and said he would go to court to prevent legitimate votes from being counted.
Stocks later pared back losses but remain jumpy in premarket trading.
Here’s were things stand this morning.
Uncertainty is the enemy of markets. Investors had hoped that early results would point to a clear winner sooner rather than later, avoiding the nightmare scenario of a contested election.
Stocks finished sharply higher Tuesday, with the Dow logging its best day since July, as Wall Street had predicted a quick victory for former Vice President Joe Biden. The S&P had its best day in a month.
The?US presidential election?is far from decided. But Chinese markets may already be getting jittery about the possibility that President Donald Trump could pull out a second term.
China’s yuan briefly plunged as much as 1.4% against the US dollar on Wednesday as Trump?remained in contention?with former Vice President Joe Biden and was projected to win key states like Florida and Texas.
The drop in the offshore yuan, where the currency is traded more freely, is the largest single-day percentage drop since February 2018, according to Stephen Innes, chief global market strategist for Axi.
The offshore yuan eventually pared losses, and was last down 0.7%, or about 6.7 yuan per US dollar. The more tightly controlled onshore yuan slumped 0.6% after falling more than 1% in Shanghai.
“In light of China-US tensions, the [renminbi] market movement hinges on the US election outcome,” according to Ken Cheung, chief foreign exchange strategist for Asia at Mizuho Bank. He wrote in a research note Wednesday that should Trump secure reelection, that would suggest “the extension of America First agenda and protectionism policy.”
Although the broad S&P 500 is up less than 1% this morning, the tech-heavy Nasdaq is up nearly 3%.
What’s that all about?
David Joy, chief market strategist at Ameriprise, said the Nasdaq gains could reflect the view that many big tech firms and other stocks that benefit from rapid growth would do better under President Donald Trump than stocks that get a boost from a general strengthening of the economy.
Still,?the election is not close to being called, and strategists are cautioning against drawing early conclusions.
“We expect volatility to remain elevated,” Credit Suisse told clients early Wednesday. “Amid the lack of clarity, patience is required.”
Markets had rallied over the past few days, because investors believed the election would not be close and a winner would be decided Tuesday night. They also expected Democrats to take control of the Senate.
However, the winner of the presidential race has not yet been determined, and it’s very much up in the air which party will hold control of the Senate in January.
Investors had been buying up stocks in anticipation that a Democratic-controlled Congress with a Democratic president could be more willing to pass a comprehensive and large fiscal stimulus plan to give the US economy a much-needed boost during the coronavirus pandemic. Economists are worried about the fate of the US recovery ahead of a difficult winter as Covid-19 cases rise again.
With election results still uncertain, the fate of economic stimulus remains unclear as well.
Wall Street’s?nightmare scenario could be playing out, in which one or both presidential candidates?contest the results?of Tuesday’s election.
Speaking at the White House early Wednesday, President Donald Trump attacked legitimate vote-counting efforts, suggesting attempts to tally all ballots amounted to disenfranchising his supporters. He also prematurely declared victory, and?baselessly claimed a fraud was being committed.
Former Vice President Joe Biden, however, urged patience.
CNN has not yet called several key races, including Arizona, Pennsylvania, Wisconsin and Michigan. In some places, it could take days to count all the votes.
“With Donald Trump clearly now pushing the case that this is going to be unfair, this is going to be challenged — that’s just going to make markets anxious this could [take] weeks,” ING chief international economist James Knightley told CNN Business.
The best historical parallel is the?2000 standoff?between Al Gore and George W. Bush. The S&P 500 dropped nearly 12% between that election and the December 20 low, according to RBC.
The?United States dollar?has been weak for most of Donald Trump’s presidency.
Tax cuts, a bigger deficit and several?interest rate cuts?from the Federal Reserve have pushed the greenback lower. But even if Trump loses to Joe Biden, the dollar may not dramatically rebound anytime soon.
A Biden administration would likely push for even?more stimulus?for consumers and small businesses because of the Covid-19 pandemic — especially if a blue wave gives Democrats control of the Senate.
This spending would likely weaken the dollar a bit further or, at a bare minimum, keep it relatively flat.
The US dollar ticked up 0.4% against a basket of top currencies this morning, while demand for benchmark 10-year US Treasuries rose, sending yields lower.
In Asia, stock markets were generally higher, although Chinese indexes remained muted after the shock suspension of?Ant Group’s giant IPO?Tuesday left investors dazed. Japan’s?Nikkei 225?(N225)?finished up 1.7%, while South Korea’s?Kospi?(KOSPI)?rose a more moderate 0.6%. The?Shanghai Composite?(COMP)?rose 0.2% and Hong Kong’s?Hang Seng Index?(HSI)?shed 0.2%.
European markets were mostly higher, with France’s?CAC 40?(CAC40)?up 0.8% and Germany’s?Dax?(DAX)?increasing 0.6%. The FTSE 100 added 0.5% in London.