Wall Street opened on a high note Tuesday as investors expressed confidence that a clear winner would be declared in the U.S. election and that a fiscal stimulus deal would be swiftly passed.
The Dow Jones Industrial Average soared by more than 600 points on Election Day morning, with the S&P 500 gaining 1.9 percent and the Nasdaq composite rising by around 1.5 percent.
“Ultimately, the markets want clarity, and the main threat this week is the emergence of a contested election,” Tom Essaye, founder of The Sevens Report and a stock market analyst, wrote in a note. “If races are tight enough for campaigns to sue to halt or extend recounts, expect a reversal.”
President Donald Trump has repeatedly called into question the integrity of the election system, and has argued against widespread voting by mail. He has repeatedly claimed, without any evidence, that the historic number of mail-in votes will lead to massive ballot fraud. And he has argued that the election must be called by the end of Tuesday, even though it always takes states days or in some cases weeks to certify results.
Wall Street’s rebound comes just one week after the market’s worst performance in seven months, when the Dow fell by 940 points after soaring coronavirus infection rates triggered a new round of restrictive measures, including monthlong lockdowns in some parts of Europe.
While investors are typically lukewarm about the prospect of a Democratic government, the pandemic has changed that. A “blue wave,” wherein Democrats gain control of the White House and both chambers, is seen as far more likely to implement a large stimulus plan.
That would mean financial relief for the millions of workers who lost their job during shutdowns meant to halt the spread of the coronavirus, and whose additional unemployment benefits expired at the end of July. A new round of emergency aid would encourage consumer spending, spur economic growth, and boost market confidence.
Investors are also preparing for the Federal Reserve’s two-day monetary policymaking meeting on Wednesday and Thursday, and the crucial monthly jobs report, which the Bureau of Labor Statistics will release on Friday morning.
“The Federal Reserve’s outlook suggests the U.S. won’t get back to full employment until 2023,” said Mark Hamrick, senior economic analyst at Bankrate. “Among the wild cards are the outcome of the election, dictating policy decisions, and the timing and availability of safe and effective vaccines.”