Stocks extended gains, Treasury yields jumped while the dollar climbed against the Mexican peso and the Japanese yen as early returns bolstered trades that have for months risen with Donald Trump’s election prospects.
With polls closed in about half the US states, futures on the S&P 500 were up almost half a percentage point, US 10-year yields rose eight basis points to 4.35% and Bitcoin rallied 2.9%, moves that together bore the imprint of trades linked to a Republican victory. While results were still being collected and polls remained open in many key states, the ex-president’s odds of election were climbing on betting markets and on national forecasting sites such as Decision Desk HQ.
Trump Media & Technology Group Corp. rallied in post-market trading. Tesla Inc. also climbed as the company is in a unique position this election, since it can benefit from a Democrat win given the party’s support for the electric-vehicle industry, and at the same time Elon Musk’s support for Trump means a Republican victory can also be seen as a positive for the automaker. Contracts on the Russell 2000 Index added 1.5%. Smaller companies with typically domestic operations are seen as potential gainers in a Republican win, given the party’s protectionist stance.
Equities in Japan and Australia climbed. Chinese equities were mixed, with the CSI 300 Index of onshore shares edging higher in early trading while a gauge of the nation’s Hong Kong-listed stocks down about 1%.
“It’s still very early and I expect we could see some wide swings in both directions,” said Keith Lerner at Truist. ‘’That said, on a short-term basis, several of the betting sites show a steep upswing in former President Trump’s odds of winning as early voting results get tabulated. Consequently, we see some of the perceived Trump trades such as small caps, cryptocurrencies, interest rates and even Trump Media having a boost right now. Still, we have a long night to go.”
In widely expected results, Trump was declared the winner in Indiana, Kentucky and West Virginia, while Kamala Harris took Vermont. Early results from Georgia, which narrowly voted for Democrats four years ago, could offer initial insight into how the two candidates are performing. Pennsylvania and parts of Michigan, both crucial battlegrounds, close at 8 p.m. local time.
In contrast to Tuesday’s relatively calm session, Wall Street saw the potential for outsized moves almost regardless of the election’s outcome.
Goldman Sachs Group Inc.’s trading desk said a Republican sweep may push the S&P 500 up by 3%, while a decline of the same size is possible should the Democrats win both the presidency and Congress. Moves would be half as much in the event of a divided government. Andrew Tyler at JPMorgan Securities said anything other than a Democratic sweep is likely to cause stocks to rise.
The call for a year-end rally has history on its side, as it tends to be a seasonally strong period for US stocks.
To Morgan Stanley’s Mike Wilson, the election could serve as a “clearing event” that kicks off a year-end rush into stocks. At JPMorgan Chase & Co., Dubravko Lakos-Bujas says the setup for equities looks solid through December once the presidential race is called. He expects confidence to grow and volatility to decrease, leading investors to unwind hedges and refocus on the Fed at a time when the economy and corporate earnings remain resilient, a combination that will drive further gains.
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