U.S. stock futures added to their post-election gains on Sunday evening after Democrat Joe Biden defeated incumbent Donald Trump in the U.S. presidential election.
Futures for the Dow Jones industrial average climbed 150 points, and S&P 500 futures rose 0.5%.
The broad S&P 500 index soared 7.3% last week, its best weekly gain since April, fueled by gains in Big Tech stocks on the potential for more gridlock in Washington. With Congress likely to remain split between Democrats and Republicans, that raised investors’ expectations that business-friendly policies may stick around, regardless of who holds the presidency.
The upside of a split Congress for markets is that it may prevent Democrats from approving some of the measures investors feared, such as higher tax rates and tougher antitrust policies for big technology companies.
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“Although a Biden win was pretty much priced-in by the markets, his victory will eliminate uncertainty,” Nigel Green, chief executive and founder of financial consultancy deVere Group, said in a note.
Trump has refused to concede the election, vowing to put forth legal battles. Though analysts expect the post-election rally to continue regardless.
“Even possible legal challenges from Trump will be dismissed by investors who will instead be focusing on the renewed certainty and stability that a Biden White House will bring, including in key areas such as trade tensions with China,” Green added.
Still, investors and economists say the economy needs such stimulus, particularly when the country’s new coronavirus cases are setting records once again.
The U.S. recorded 126,742 cases Saturday, the third day in a row the total exceeded 120,000, according to data from Johns Hopkins. The United States, with about 4.3% of the world population, has about 20% of the cases.
Europe is also facing a troubling rise in infections, and governments there have already brought back restrictions on businesses in hopes of slowing the spread. Even if the strictest lockdowns don’t return in the United States, the worry is that the worsening pandemic will scare consumers by itself and erase profits for businesses.
“Stocks’ and society’s ability to withstand the looming virus related economic slowdown is critical,” says Julian Emanuel, managing director and chief equity and derivatives strategist at BTIG, a financial services firm. “Can the U.S. government put together a stimulus package before year-end?”
Data released Friday showed that the U.S. economy added more jobs than economists had expected in October, with employers adding 638,000 jobs last month. The stronger-than-expected tally suggests the economic recovery may still be intact, though it also marked another slowdown in monthly job growth.
“As we see it, the recent string of good economic data is likely to cool off as the best numbers of the reopening of the economy fade,” Peter Cardillo, chief market economist at Spartan Capital Securities, said in a note.
Separate data released Thursday showed that the number of Americans seeking first time jobless claims fell by 7,000 to a seasonally adjusted 751,000 for the week ended Oct. 31, according to the Labor Department. That was the lowest level since mid-March. Continuing claims, which include those receiving unemployment benefits for at least two straight weeks, remained historically high at 7.3 million.
That could signal further pain for the labor market, especially if the financial needs of small business aren’t addressed, according to Cardillo.
“In other words, stimulants are needed now and not next year,” Cardillo said.
Last week, the Federal Reserve said its key interest rate will be left at a record low near zero. It reaffirmed its readiness to do more to support the economy under threat from a worsening pandemic.
Negotiations on another government aid package have broken down in recent months. Yet Fed Chair Jerome Powell and other central bank officials have expressed concern that the end of the additional unemployment aid and the expiration of support for small businesses will slow the recovery.