Wall Street on course for sharp gains as election hangs in balance

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Wall Street on course for sharp gains as election hangs in balance

(Reuters) – Wall Street’s main indexes were set to open sharply higher on Wednesday as the race for the White House went down to the wire, although investors remained worried about the prospect of a contested result.

Republican President Donald Trump and Democratic contender Joe Biden both claimed they were on course for victory after results for a majority of states were called. Trump went further, claiming falsely that the election was being “stolen” from him with millions of votes still uncounted.

The knife-edge election and the prospect of an acrimonious legal battle to determine the winner sent S&P e-mini futures tumbling 1.15% earlier, but they recovered to trade up 1.7% by 08:43 a.m. ET (1343 GMT).

“While we still don’t have full results, it looks like instead of a red wave or blue wave scenario — with all respect to Prince — we have more of a purple rain scenario with gridlock being the most likely outcome,” said Brian Jacobsen, senior investment strategist at Wells Fargo Asset Management in Menomonee Falls, Wisconsin.

“That could mean less likelihood of fiscal stimulus, but it could also mean a lower likelihood of big changes to tax policy or regulatory policies.”

Trump won the battlegrounds of Florida, Ohio and Texas, dashing Biden’s hopes for a decisive early victory, but the former vice president said he was confident and was on track to winning the White House by taking three key Rust Belt states.

Biden was also back as favorite to win the election in online betting markets, according to data from three aggregators, after he overtook Trump in the state of Wisconsin.

Investors have said they favor a definitive, fast resolution to the election as that would clear the way for a deal on a stimulus package to help the damaged domestic economy. Analysts have also said the market will be comfortable with a clear Trump victory.

Shares of technology mega-caps including Apple Inc, Amazon.com Inc and Facebook Inc surged more than 3% in premarket trading with some investors pointing to a lower threat of antitrust scrutiny for Big Tech under Trump than under a Biden presidency.

Chances faded for Democrats to score a big win in the Senate as Republicans held the line in several contests that had seemed up for grabs.

“While the votes are still being counted, the market is relieved that no matter who wins the presidency, the Senate remains unchanged and the Congress remains unchanged,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Some infrastructure, renewable energy and marijuana stocks, seen as likely winners from a Biden presidency, sank as much as 5%.

Still, the prospect of political uncertainty also sent investors to U.S. Treasuries, sparking the biggest one-day drop in 10- and 30-year bond yields since June. Shares of U.S. banks, which typically track Treasury yields, slipped between 1.1% and 2.5%. [US/]

Private prison operators Geo Group and CoreCivic Inc gave up gains to fall 1.2% and 2.8% respectively as Biden, who has committed to ending the federal government’s use of private prisons, was back as the favorite to win the election among online betters.

At 08:43 a.m. ET, Dow E-minis were up 116 points, or 0.42% and Nasdaq 100 E-minis were up 415.25 points, or 3.68%.

On election night in 2016, U.S. futures plunged as Trump pulled off an upset victory against Democrat Hillary Clinton. However, the next day marked the start of the so-called “Trump rally” that saw the S&P 500 jump 5% in a month, fueled by promises of massive tax cuts and financial deregulation.

The S&P 500 has climbed about 57% since Trump’s election in 2016, with the information technology index surging 149% and energy tumbling 56%, according to Datastream.

Source: https://www.reuters.com/article/idUSKBN27K1WY