U.S. stocks climbed on Wednesday, led by tech shares, even as the results of the presidential contest so far failed to yield a clear winner.
The Dow Jones Industrial Average jumped 560 points, or 2.0%. The S&P 500 traded 2.3% higher. The tech-heavy Nasdaq Composite popped 3.2% as investors crowded back into the trade that’s been working for most of this tumultuous year.
“I think the big news for the markets right now at least as it looks preliminary is that there’s not going to be a blue wave, which is generally supportive for markets,” said Mike Lewis, managing director of U.S. equity cash trading at Barclays, on CNBC’s “Squawk Box.” “I think that the outlook going forward for markets is this is going to be more about policy and the Fed than it’s going to be about politics, which is a good thing for markets.”
Earlier in the overnight session, futures contracts for the Dow and S&P 500 came under some pressure after President Donald Trump tried to claim victory even though millions of legitimate votes were not yet counted.
“We were getting ready for a big celebration. We were winning everything, and all of a sudden it was just called off,” Trump said. “We’ll be going to the U.S. Supreme Court, we want all voting to stop.”
“We don’t want them to find any ballots at 4 o’clock in the morning and add them to the list,” he added.
Democratic nominee Joe Biden appeared to be unable to take North Carolina, with Trump holding a lead in that state, according to NBC News. However, Biden was leading in Arizona and Michigan, according to NBC News, but it was too early to call the states. Key swing states Wisconsin and Pennsylvania could take days to determine.
“We believe we’re on track to win this election,” Biden said to supporters in Delaware overnight. The candidate said the winner could be known Wednesday morning but it could take a little longer.
Trump is projected to win the presidential vote in Florida, Indiana and Kentucky along with South Dakota, Arkansas and Ohio, NBC News said. Trump is also projected to win Alabama and North Dakota. Biden is projected to win Vermont, Delaware, Maryland and Massachusetts as well as Colorado, New York and Virginia, according to NBC News.
Shares of major tech-related companies jumped with Amazon, Apple and Microsoft all up at least 3%. Facebook popped 7%, while Google-parent Alphabet jumped more than 5%.
Wall Street traders and investors attributed the move in tech to a number of factors, including the group’s consistently solid returns and safety appeal in times of uncertainty. Additionally, some viewed the potential for Republicans to hold onto the Senate as a positive for the group since higher capital gains taxes from a Democrat congress could have weighed on the high-growth sector.
“It appears investors may be satisfied with at least half a loaf (Republican Senate) and no tax increase, knowing they have a ‘Fed put’ if fiscal assistance is slower in coming,” Stifel Head of Institutional Equity Strategy Barry Bannister said in a note Wednesday. “This favors Growth stocks over Value near-term.”
Bannister raised his S&P 500 target price to 3,800 from 3,100 by spring 2021, which would represent a more than 10% gain from here.
Contested election?
Traders also grappled with the possibility of a contested election result, which Wall Street strategists say could have major consequences for the stock market. Among other things, analysts warn that a delayed result would hamper the ability of Washington to pass additional fiscal stimulus amid a jump in Covid-19 cases.
“News of a contested election could cause a sharp drop in stocks in the very short term, but we do not see it as a bearish gamechanger,” Tom Essaye, founder of the Sevens Report, said in a note.
Wall Street was coming off a strong session on Tuesday, with the Dow jumping more than 500 points. The S&P 500 and Nasdaq Composite, meanwhile, jumped more than 1% each.
Those moves came as investors hoped a delayed, or contested, U.S. presidential election result would be avoided and a clear winner would emerge Tuesday night. Biden was ahead of Trump in the polls leading up to Tuesday.
Senate battle
Traders were also eyeing the battle for the Senate and its implications for future fiscal policies. So far on election night, it was unclear whether the Democrats would be able to win back the Senate. Republicans possibly gained a key win with Republican Sen. Joni Ernst projected to win the Iowa Senate race.
Going into the election, traders feared a Democrat win in the Senate and a Biden presidency could bring higher tax rates, impacting technology shares especially. At the same time, some investors were hopeful that a so-called blue wave could yield a bigger stimulus to battle the effects of the coronavirus, boosting stocks linked to the broader economy.
The S&P 500 lost 0.4%, on average, the day after presidential elections, according to Baird.
Chao Ma of the Wells Fargo Investment Institute thinks investors with a longer time horizon should not worry too much about the election’s impact on the broader market.
“The history of the economy and the S&P 500 Index suggests that a president’s party affiliation has made little difference when it comes to long-term returns,” said the firm’s global portfolio and investment strategist. “The long-term drivers of the S&P 500 index have been the economy and business earnings, and we expect that to continue to be the case … beyond the 2020 elections.”
One year out from a presidential election, the S&P 500 averaged a return of more than 8%, according to the Baird data back to 1960.
“When this is all said and done, I still believe equities will move higher regardless of who wins the Oval Office,” said Ryan Nauman, market strategist at Informa Financial intelligence, noting the coronavirus pandemic and U.S. monetary policy will be bigger market drivers over the long haul.
—CNBC’s Pippa Stevens contributed to this report.
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