Technology stocks gained sharply on Wednesday, driving the S&P 500 and Nasdaq Composite to their best postelection trading day on record. The Dow, meanwhile, had its second best day after election performance.
The S&P 500 rose 74.42 points, or 2.2%, to 3,443.44, aided by big tech stocks. The sector could enjoy less regulatory scrutiny without a blue wave, and fading hopes for near-term stimulus could bring lower economic growth, a condition that has spurred on tech company outperformance in recent years.
The tech-heavy Nasdaq Composite gained 430.21 points, or 3.9%, while the Dow Jones Industrial Average climbed 367.63 points, or 1.3%, as value stocks, many of which are highly correlated with changes in the economy, underperformed. The Russell 2000, a small-cap index that is seen as more sensitive to U.S. growth, was nearly flat.
The 10-year Treasury note rallied, as investors pared back their expectations for stimulus. Its yield sank 0.11 of a percentage point, its biggest single-day drop since April, when the Federal Reserve was easing policy aggressively to offset the spread of the coronavirus pandemic. The ICE U.S. Dollar Index was down 0.1%, however.
Economic data points were mixed. Payroll provider ADP said Wednesday that U.S. companies added 365,000 jobs last month, well off the 600,000 jobs expected by economists polled by The Wall Street Journal. And data from the Institute for Supply Management indicated that service-sector activity grew at a slightly slower pace than expected in October.
Overseas, investors also struggled to get a grip on the race, with the Stoxx Europe 600 up 2.1%, and modest gains elsewhere, but those markets were met with volatility. In Asia, the Nikkei 225 index closed up 1.7%, while the China CSI 300 gained about 0.8%.
Former Vice President Joe Biden is maintaining a narrow lead over President Donald Trump, according to the Associated Press. Five states remain undecided: Georgia, Michigan, North Carolina, Nevada and Pennsylvania. The president’s campaign has filed a lawsuit in Michigan to stop vote counting and the final result of the election may not be know for days, or possibly weeks.
In the Senate, Republicans fended off challengers in South Carolina and Kentucky, with control hinging on a few races yet to be called.
“Donald Trump has significantly outperformed the polls,” a team of strategists at Jefferies, led by Sean Darby, told clients in a note. “The election outcome has morphed from a wide victory margin for the Blue Wave to a more complicated result perhaps determined by the Supreme court.”
A so-called blue wave refers to what Democrats had hoped for, a clear sweep of the White House and Congress. Meanwhile, in a speech to supporters earlier on Wednesday, Trump threatened to take the election to the Supreme Court, though without details about the kind of legal action or what exactly would be contested.
Both he and rival Joe Biden told supporters that they were confident of an election win. The AP and other news outlets have not called a winner of the election, with millions of absentee and mail-in votes yet to be counted.
Any legal challenge though would mean it could take weeks for an election result, said Jefferies’ Darby, and complicate the process of getting a stimulus bill passed this side of Christmas. With U.S. coronavirus cases at record levels and millions still jobless due to the pandemic, investors have been hoping for another round of aid to boost the U.S. economy.
Shares of Uber (Uber) and Lyft (LYFT) surged as California voters approved proposition 22, which allows ride-sharing companies in California not to classify drivers as employees. A ‘no’ vote would have disrupted the gig-economy revenue model of Uber California. Uber shares rose 14.7%. The company sees about 5% of its revenue from California, according to Wedbush Securities analyst Dan Ives.
Lyft shares also rose, gaining 11.3%. The company sees about 16% of revenue from California. The vote “removes a significant overhang and dark cloud for the likes of Uber and Lyft and ends this “head scratching” AB5 legislation chapter that was a major threat to the future of the Gig Economy and thousands of drivers throughout California,” Ives wrote in a note.
Managed-care stocks were also deemed winners from the election, as a divided government is seen as likely to prevent big changes to U.S. health-care policy. Anthem (ANTM) rallied 11.7%, Cigna (CI) rose 14.5%, Humana (HUM) rose 6.7% and UnitedHealth Group (UNH) advanced 10.3%.
Biogen (BIIB) soared 44%, after filings from the Food and Drug Administration indicated that regulators could approve the company’s Alzheimer’s drug. At an FDA meeting Friday, outside advisors will consider the approval request.
Advanced Micro Devices (AMD) shares rose 6.2% as analysts at Goldman Sachs upgraded the stock to Buy from Neutral and raised their price target to $96 from $84.
Wendy’s (WEN) shares fell roughly 5.8% after the company reported same-store-sales growth for the quarter of 7%, in line with analyst estimates and earnings per share of 19 cents, beating estimates of 15 cents.