Thursday November 5th

5-11-2020

Dow futures jump more than 300 points as Wall Street extends post-election rally

U.S. stock index futures were sharply higher early Thursday on hopes the winner of the U.S. presidential election would soon be determined. Futures contracts tied to the Dow Jones Industrial Average rose 353 points, or 1.3%. S&P 500 futures and Nasdaq 100 futures gained 1.7% and 2.5%, respectively. Late Wednesday, NBC News projected that former Vice President Joe Biden was the winner in Wisconsin and Michigan, both states that President Donald Trump won in the 2016 presidential election. Biden would then be just 17 Electoral College votes away from winning, NBC News reported Wednesday. “Markets are reacting very positively to the fact that a great deal of the election uncertainty has passed. Not all of it, but at least the worst outcomes seem to have been avoided. Markets hate uncertainty, and this is likely to be a tailwind for a while,” said Brad McMillan, chief investment officer at Commonwealth Financial Network. Even with the president-elect unclear, stocks rose broadly during Wednesday’s trading session as hopes for a blue wave in Congress dwindled, which some argued would have been a headwind for areas of the market including Big Tech. “It looks likely that we’ll see a split Congress, which, based on history, has been the preference of the stock market,” said Lindsey Bell, chief investment strategist at Ally Invest. “You can see this expectation being priced into the market [Wednesday] with health care, communication services and technology stocks are leading the market.” On Wednesday, the Dow finished the session with a gain of 367.63 points, or 1.3%. At its session high, the 30-stock average gained 821 points. The S&P 500 advanced 2.2%, while the Nasdaq Composite jumped 3.9%. U.S. equities’ surge came despite the election results remaining up in the air following record voter turnout, as well as a jump in absentee ballots as people stayed home amid a spike in Covid-19 cases. The Trump campaign said it would seek a recount in Wisconsin, while earlier on Wednesday announcing that it was suing to halt ballot counting in Michigan and Pennsylvania. Late Wednesday the campaign also said it had filed suit in Georgia seeking to require all counties there to separate ballots that arrive after the voting deadline from other, “legally cast ballots.” Trump on Wednesday night tried to falsely claim victory in Pennsylvania, Georgia, North Carolina and Michigan. NBC News has yet to call the battleground states of Pennsylvania, Georgia and North Carolina. Trump’s comments followed his declaration in the early hours of Wednesday that he had won the race, despite the fact that millions of votes had not been counted. Late Wednesday afternoon, Biden said in a speech delivered in Wilmington, Delaware that he expected to win the election. The Democratic nominee’s comments followed remarks by his campaign manager Jen O’Malley that Biden would be “the next president of the United States.” Meanwhile, the Democrats were projected to retain control of the House, while flipping the Senate became increasingly unlikely. “With no blue wave, we are likely to see the Senate remain very closely divided, which will constrain the policy options of whoever wins the presidency. That probably rules out any substantial activity on taxes, as well as limiting any actions to control the major tech firms,” Commonwealth Financial Network’s McMillan added. Facebook gained 8.3% on Wednesday, while Amazon and Alphabet advanced more than 6% each. Apple and Netflix rose 4% and 2%, respectively. However, some strategists noted that a contested election, which is not off the table at this point, could lead to a sharp drop in stocks over the short-term. “More than anything, the market is looking for a peaceful transition of power. Social unrest or a contested election could trigger a significant increase in volatility,” said Don Calcagni, chief investment officer of Mercer Advisors. Senate Majority Leader Mitch McConnell said on Wednesday that passing further stimulus will be the chamber’s top priority when it reconvenes, although analysts warned that without a blue wave the package will be smaller than the $3 trillion Democrats wanted. Stocks in Asia-Pacific were higher on Thursday as investors continued to wait for the result of the U.S. election. Hong Kong’s Hang Seng index led gains among the region’s major markets and surged 3.25% to close at 25,695.92. In Japan, the Nikkei 225 advanced 1.73% to close at 24,105.28 while the Topix index ended its trading day 1.39% higher at 1,649.94. Over in South Korea, the Kospi gained 2.4% to close at 2,413.79. Mainland Chinese stocks were also higher on the day, with the Shanghai composite up 1.3% to about 3,320.13 while the Shenzhen component advanced 1.72% to 13,894.26. Oil dropped on Thursday as Democrat Joe Biden edged closer to the White House in a nail-biting U.S. presidential election but the Republicans look likely to retain Senate control, decreasing the chances of any huge Covid-19 relief package. U.S. West Texas Intermediate (WTI) crude futures fell 64 cents, or 1.63%, to $38.51 a barrel at 0440 GMT, while Brent crude futures dropped 68 cents, or 1.65%, to $40.55 a barrel. Both contracts had jumped around 4% on Wednesday. Gold jumped to a two-week high on Thursday as the dollar slipped, with investors betting on the likelihood of bigger economic support measures as Democrat Joe Biden inched closer to the Oval Office in the U.S. election. Spot gold was up 0.9% at $1,919.61 per ounce, having earlier scaled its highest peak since Oct. 22 at $1,920.91. U.S. gold futures gained 1.3% to $1,921.30.