Stocks worldwide rally again as Election Day finally arrives
NEW YORK (AP) — Stocks powered higher Tuesday after a bruising U.S. presidential campaign that sent markets spinning because of the uncertainty it sowed finally reached its end.
The S&P 500 rose 58.92 points, or 1.8%, to 3,369.16 for its second straight healthy gain. The rally was widespread and global, with Treasury yields, oil prices and stocks around the world all strengthening.
The Dow Jones Industrial Average climbed 554.98, or 2.1%, to 27,480.03, and the Nasdaq composite added 202.96, or 1.9%, to 11,160.57.
More than anything, what investors hope for from the election
is a clear winner to emerge, even if it takes some time for all the
votes to be tallied. Whether that’s President Donald Trump or former
Vice President Joe Biden is less important, because history shows stocks
tend to rise regardless of which party controls the White House.
“The
markets are neither red nor blue, and today they’re decidedly green,”
said Rod von Lipsey, managing director at UBS Private Wealth Management.
What investors fear is the prospect of a contested election, one
that drags on and injects even more uncertainty into markets. Under
such a scenario, much of Wall Street expects a sharp drop in stocks. The
future political makeup of the Senate is another unknown throwing uncertainty into the markets, along with the timing of a possible COVID-19 vaccine.
“There’s
a sense that we might get some clarity on the outcome of the direction
of one or two wild cards that have been moving the market,” von Lipsey
said.
If Biden ends up winning, as polls suggest, the thought is
that could open the door to a big support package for the economy,
particularly if the Democrats also take control of the Senate. Some
areas of the market that would benefit from a large stimulus effort and
spending on infrastructure rose more than the rest of the market
Tuesday, including stocks of smaller companies and industrial
businesses.
If Trump were to win and the Senate stays under
Republican control, it would likely lead to less stimulus than under a
Democratic sweep, according to Chris Zaccarelli, chief investment
officer for Independent Advisor Alliance. A Biden win and Republican
Senate would be least beneficial to stocks, meanwhile, because it would
mean the lowest chance for stimulus.
Investors and economists
have been clamoring for a renewal of stimulus since the expiration of
the last round of supplemental benefits for laid-off workers and other
support approved earlier by Congress.
But investors see cases for
optimism in other electoral scenarios, too. If Trump were to win, that
would likely mean a continuation of lower tax rates and lighter
regulation on businesses, which would prop up the corporate profits that
are the lifeblood of the stock market.
Ultimately, many
professional investors say which party controls Washington matters much
less to the economy and markets than what happens with the pandemic and
whether a vaccine can arrive soon to help the economy heal.
The
last two days of gains for Wall Street have helped the S&P 500
recover roughly half its 5.6% loss from last week, which was its worst
since the market was plunging in March.
While the election is
dominating investors’ attention, plenty of other market-moving events
are looming this week. The Federal Reserve is meeting on interest-rate
policy and will announce its decision on Thursday. Its earlier moves to
slash interest rates to record lows and to step forcefully into bond
markets to push prices higher have helped Wall Street soar since March.
The
Labor Department is also releasing its jobs report for October on
Friday, where economists expect to see another slowdown in growth.
Meanwhile, it’s another heavy week for corporate earnings reports as
companies continue to report drops in profit for the summer that weren’t
as bad as Wall Street feared.
Hanging above it all is the
continuing coronavirus pandemic. Several European governments are
bringing back restrictions on businesses in hopes of stemming worsening
virus counts. In the United States, where infections are also rising at a
troubling rate, the worry is that fear alone of the virus could depress
sales for companies.
So far this earnings reporting season,
companies are saying their profits fell during the summer, but not by as
much as Wall Street feared.
Arista Networks jumped 15.4% for the
biggest gain in the S&P 500 after the cloud-networking company
reported a 19% drop in net income that nevertheless topped analysts’
forecasts.
Stock indexes across Europe and Asia rose 2% or more,
while the yield on the 10-year Treasury climbed to 0.88% from 0.84% late
Monday.
A gauge of fear in the U.S. stock market, which measures expected volatility for the S&P 500, fell 6.4% and continued its decline following last week’s jump to its highest level since June.
AP Business Writer Joe McDonald contributed