Address

Precise Investors

Stocks & Shares

Stocks rally on big tech gains

S&P 500

The S&P 500 gained 2.9 per cent, the Dow Jones Industrial Average added 2.4 per cent, and the Nasdaq composite rose 4.1 per cent

Stocks are rallying Wednesday, as investors embrace the upside of more gridlock in Washington, after markets spun through an election night of surprises and sharp swings.

The S&P 500 was up 2.9 per cent and on pace for its best day in more than five months. The Dow Jones Industrial Average was up 661 points, or 2.4 per cent, at 28,146, and the Nasdaq composite jumped 4.1 per cent.

Analysts said the gains came as markets focused on the benefits of the country’s political control remaining split between Democrats and Republicans. But it followed up on a tumultuous overnight session where US stock futures and bond yields swung up, down and back again as results showed a race that’s still too early to call between President Donald Trump and former Vice President Joe Biden. It’s unclear when a winner for the presidency can emerge.

Markets are just as keyed in on control of the Senate, where prospects for a Democratic takeover are dropping after Republicans held onto seats considered vulnerable. That in turn lowers the prospects for the tax increases and tighter regulations on businesses that investors saw coming in a potential Democratic electoral sweep, even if it also hurts the likelihood of a big stimulus effort for the economy.

The first information that people are digesting is that a split government is ok, and we can deal with this, said Melda Mergen, deputy global head of equities, Columbia Threadneedle. No big changes are expected anytime soon on the policy side.

She cautioned, though, that the initial moves for the market may not last.

It’s a very quick reaction without knowing the final results, she said. It’s emotional rather than rational.

Much of Wednesday’s strength for Wall Street was due to big gains for technology stocks. Investors have increasingly seen these stocks as some of the safer bets in the market, able to grow their profits even in a pandemic as more of daily life shifts online.

They don’t need a big stimulus effort for the economy as much as other companies, and the likelihood of Washington approving such a package dropped with the chances of a Democratic sweep. That led to the much better performance for the tech-heavy Nasdaq over other indexes. Microsoft, Amazon, Facebook and Google’s parent company all rose at least 5 per cent.

Other areas of the stock market, where profits are more dependent on the strength of the economy, lagged behind. Financial stocks in the S&P 500 rose 0.1 per cent. Companies that make construction materials and could have benefited from a big infrastructure plan under a Democratic sweep were falling.

Some of the market’s sharpest moves overnight were in yields for US government bonds, which had earlier risen on growing expectations for big economic stimulus.

The 10-year Treasury yield swung from 0.88 per cent late Tuesday up to 0.94 per cent as polls were closing. It then sank as low as 0.75 per cent after Trump made premature claims of victories in several key states, Republicans held onto Senate seats and a couple economic reports came in weaker than expected. It sat at 0.78 per cent in afternoon trading.

Important:

The articles are for information purposes only and Precise Investors shall not be held responsible for any errors, omissions or inaccuracies within it. Any rules or regulations mentioned within the website are those relevant at the time of publication and may not be the most up-to-date.

Precise Investors does not endorse any of the products or services that appear on it or are linked to it and are not liable for any action that you may take as a result of the content of this website, or losses or damage you may incur doing so.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

Please remember that investments of any type may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

Leave a Reply

4 + 7 =