US stocks jumped on Thursday, as investors bet Republicans would retain control of the Senate and block any major policy changes under a possible Joe Biden White House that could dampen corporate profits.
With votes still being counted in battleground states, investors were abandoning cautious pre-election positioning, driving all of Wall Street‘s main indexes up for a fourth straight session.
While a fiscal stimulus package is widely expected, the size of any deal reached in a divided Congress is likely to be much smaller than anticipated. This in turn could pressure the US Federal Reserve to pump more funds into the financial system, supporting equity prices.
Stocks got a brief additional boost from the Fed’s statement on Thursday. The central bank kept its loose monetary policy intact and again pledged to do whatever it can to sustain an economy severely damaged by the coronavirus pandemic. In the post-statement press conference, Chair Powell said the Fed would not consider directly funding fiscal activities.
Biden was edging closer to victory after winning Michigan and Wisconsin, but his Democratic party appeared unlikely to win the Senate. This eased investor worries about tighter regulations on Big Tech and a corporate tax hike.
“They stayed with what the market had expected. I think there’s concern about the economy and the trajectory of the economy. But basically, I don’t think they surprised the market; they maintained their accommodative stance and maintained that fiscal stimulus is needed,” said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey.
“Given the scenario of an election where you’re still counting ballots, it would be very difficult for the Fed to insert itself at this point.”
Some market participants cautioned, however, that it was not yet certain that Congress will remain split, so there is a slim chance markets could be in for a shock.
According to the Associated Press, as at 6.47am local time, Joe Biden garnered 264 electoral vote while Donald Trump secured 214 electoral votes.
27o electoral votes are needed for either party to emerge winner.
The Dow Jones Industrial Average rose 542.52 points, or 1.95%, to 28,390.18, the S&P 500 gained 67.01 points, or 1.95%, to 3,510.45 and the Nasdaq Composite added 300.15 points, or 2.59%, to 11,890.93.
This week’s rally marked the biggest four-day percentage gain for each of the three major indexes in nearly seven months.
The tech-heavy Nasdaq, packed with “stay-at-home” corporate winners under this year’s lockdowns, gained well over 2% and was within striking distance of its Sept. 2 record closing high.
Advancing issues outnumbered declining ones on the NYSE by a 4.57-to-1 ratio; on Nasdaq, a 3.30-to-1 ratio favored advancers.
The S&P 500 posted 75 new 52-week highs and no new lows; the Nasdaq Composite recorded 155 new highs and 21 new lows.
Volume on US exchanges was 10.42 billion shares, compared with the 9.16 billion average for the full session over the last 20 trading days. – Nov 6, 2020
