US stocks surged to close higher on Wednesday as the presidential election race remained cloudy but the likelihood of gridlock in Congress made investors optimistic that major policy changes would be difficult to enact.
Both President Donald Trump and Democratic nominee Joe Biden still had paths to reach the 270 Electoral College votes needed to win as states kept counting mail-in ballots. Biden held a narrow lead in Wisconsin while Trump’s campaign said it had filed a lawsuit to try and halt vote counting in that state.
A surprise win by Republican Senator Susan Collins in Maine dimmed hopes by Democrats that they could get control of the US Senate.
Growth stocks, currently comprised of a large portion of names in areas such as tech, surged 4.31% as investors expected them to keep outperforming value stocks as they have in recent months. Value names, which closed flat, are currently comprised of mostly cyclical stocks such as banks and energy.
“Even if Joe Biden wins the Presidency, it looks like we are going to have a divided congress so the opportunity to have meaningful change at the fiscal level is pretty slim, and that is what is being priced into the back end of the market today,” said David Joy, chief market strategist at Ameriprise Financial in Boston.
“If we are going to have a similar type of economic environment as we’ve had, then we are going back to an emphasis on trying to find earnings in a relatively scarce earnings environment, back to the same winners as before.”
The Dow Jones Industrial Average rose 367.63 points, or 1.34%, to 27,847.66, the S&P 500 gained 74.28 points, or 2.20%, to 3,443.44 and the Nasdaq Composite added 430.21 points, or 3.85%, to 11,590.78.
It was the biggest daily percentage gain for the S&P 500 since June 5 and for the Nasdaq, since April 14. Still, advancing issues outnumbered declining ones on the NYSE by just a 1.36-to-1 ratio; on Nasdaq, a 1.26-to-1 ratio favoured advancers.
The S&P healthcare index jumped 4.45% to close at a record high, and the information technology sector also gained strongly, as a divided Congress means slimmer chances for heightened antitrust scrutiny, capital gains taxes and a restoration of parts of the Affordable Care Act. The healthcare index notched its biggest daily percentage gain in about seven months.
Still, investors said they favour a definitive, swift resolution of the presidential race that would clear the way for a deal on a stimulus package to revive the economy.
The S&P 500 posted 49 new 52-week highs and no new lows; the Nasdaq Composite recorded 112 new highs and 28 new lows.
Volume on US exchanges was 10.39 billion shares, compared with the 9.09 billion average for the full session over the last 20 trading days. – Nov 5, 2020
