Stocks jumped on Tuesday as investors hoped a clear winner would emerge from the U.S. presidential election and a delayed, or contested, result would be avoided.
The Dow Jones Industrial Average traded 650 points higher, or 2.5%. The S&P 500 gained 2.2% and the Nasdaq Composite advanced 2%.
Shares of Facebook, Amazon, Netflix, Microsoft and Apple were all up more than 1%. UnitedHealth and Goldman Sachs both gained about 4% to lead the Dow higher.
“Ultimately, the markets want clarity, and the main threat to risk assets this week is the emergence of a contested election, so if races are tight enough for campaigns to sue to halt or extend recounts, expect a reversal of this morning’s rally,” Tom Essaye, founder of The Sevens Report, wrote in a note.
Heading into Tuesday’s vote, former Vice President Joe Biden held a lead in national polling over President Donald Trump. The former vice president earned 52% of support from registered voters compared to 42% for the president, according to an NBC News/Wall Street Journal poll from Sunday. In swing states, where the election will be decided, polling averages are tighter than the national polls.
About 60 million voters sent their ballots in the mail due to the coronavirus pandemic, according to the U.S. Elections Project. This influx of mail-in voting has raised concern over the potential for a delayed election result.
“A declared winner would certainly be better for these markets, agnostic of who it is,” said Art Hogan, chief market strategist at National Securities. “If we wake up tomorrow and we don’t have a clear winner, that shouldn’t surprise the market. But if we’re talking about this in the middle of next week and about court cases and recounts, that’s going to be the worst-case scenario.”
Investors are also eyeing the key Senate elections which will determine if the so-called blue wave will take over Congress. Major policy shifts, including further fiscal stimulus, depend on which party has majority control.
Regardless of who wins the presidential race, CNBC’s Jim Cramer thinks stocks will dip and investors have to “buy” then.
“I know that sounds simplistic, but the market is simplistic,” he said on “Squawk on the Street.” “We always try to make the market as some sort of Einsteinian philosophy.”
Wall Street was coming off a solid session in which the major averages clawed back some of their sharp losses from the previous week.
“As the election finally nears, investors who were selling on the rumor may now be buying on the news, and finally, after almost a 10% decline in the last month, buying on the dip is back,” Jim Paulsen, chief investment strategist at the Leuthold Group, told CNBC.
Stocks also got a boost after manufacturing activity in October jumped to its highest level in more than two years, pointing to a resilient economy in the face of the coronavirus. The ISM Manufacturing PMI rose to 59.3, a reading that indicates the percentage of companies reporting that activity expanded during the month.
In addition to the presidential election, the U.S. is also facing a surge in Covid-19 cases. Coronavirus cases in the U.S. continued to rise over the weekend, with more than 81,400 new infections recorded on Sunday, according to Johns Hopkins data. That brings the seven-day average of new cases past 81,000 for the first time ever, according to a CNBC analysis of Johns Hopkins data.
After the bell Monday, Royal Caribbean cancelled all of its sailings through the end of the year. The shares fell slightly in after hours.
In Europe, the U.K. became the latest country to add new Covid-19 mitigation measures, joining France, Germany, Greece, Belgium and Austria.
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