(Reuters) – U.S. stocks jumped on Thursday as bets on Republicans retaining control of the Senate eased worries of major policy changes that could hurt corporate America under a Joe Biden White House, even as the presidential election hung in the balance.
With counting continuing in the battleground states, investors were abandoning cautious positioning that many took ahead of the election, driving all of Wall Street’s main indexes up by around 2%.
Analysts predicted the fraught nature of the vote would hamper any moves by Congress to deliver more fiscal stimulus and put pressure on the U.S. Federal Reserve to pump more funds into the financial system, supporting more buying of stocks.
“Whoever emerges as President is unlikely to have a supportive Congress willing to write the President blank fiscal cheques,” said Albert Edwards, global strategist at Societe Generale.
“That means only one thing: more Fed intervention to sustain markets.”
The Fed is set to issue a statement later, after a two-day meeting delayed for the election, and is widely expected to repeat its pledge to do whatever it can to help an economy ravaged by the coronavirus crisis.
Biden was edging closer to victory on Thursday after winning Michigan and Wisconsin, but his Democratic party appeared unlikely to win the Senate, potentially making it difficult to tighten regulation on Big Tech and raise corporate taxes.
The tech-heavy Nasdaq, packed with “stay-at-home” corporate winners under this year’s lockdowns, gained 2.2% and was within striking distance of its Sept. 2 record closing high.
The Philadelphia SE semiconductor index surged 3.6% to hit an all-time high, while technology and communication services led gainers among S&P indexes.
Buying was spread across sectors, however, and the VIX volatility index, which has risen in recent months as investors feared the vote might spark falls in shares, retreated to its lowest in three weeks.
At 12:50 p.m. EST the Dow Jones Industrial Average rose 1.75% to 28,334.47, the S&P 500 gained 1.91% to 3,509.14 and the Nasdaq Composite climbed 2.22% to 11,848.51.
The materials index also hit a record high, boosted by a 6% rise in shares of U.S.-German industrial gas producer Linde.
Qualcomm Inc surged 13% after the chipmaker forecast fiscal first-quarter revenue above estimates as it predicted solid growth in 5G smart phones sales next year.
“Out of all the choices that could have happened this election season, this seems to be the one that the market is most okay with,” said Kenny Polcari, managing partner at Kace Capital Advisors in Florida, while playing down concerns over the growing list of legal challenges to the presidential vote.
“The Trump camp is going to come out and say that they are not at the moment accepting the result and that they are going to challenge it. But the market is not really concerned … it is up by another 500 points.”
Advancing issues outnumbered decliners 4.6-to-1 on the NYSE and 3.2-to-1 on the Nasdaq.
The S&P index recorded 67 new 52-week highs and no new low, while the Nasdaq recorded 213 new highs and 25 new lows.
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