US President Trump’s plan to take legal action raises uncertainty, drives investors towards ‘safer’ assets.
The major stock indexes in the United States closed higher on Wednesday after a long election night produced no clear winner in an historic presidential race but an anticipated blue wave sweep of Congress and the White House failed to materialise.
With votes still being counted in five key battleground states, the Dow Jones Industrial Average closed up more than 367 points or 1.34 percent at 27,847.66.
Earlier in the session, the thirty-share index had rallied more than 700 points.
The S&P 500 – a gauge for the health of US retirement and college savings reports – finished the session up 2.21 percent while the Nasdaq Composite Index surged to close up 3.85 percent as investors piled into tech shares, which have been outsized winners this year.
Polls showed President Donald Trump’s Democratic challenger Joe Biden had a substantial lead going into Tuesday’s vote, but as the night wore on it became evident that the race had significantly tightened in key swing states.
The race now hinges on vote counts in Georgia, Pennsylvania, Michigan, Nevada and North Carolina.
Wisconsin started Wednesday still in play, but the Associated Press called the state in favour of Biden in early afternoon trading in New York, handing him 10 electoral votes.
Biden now has 248 electoral votes compared to President Donald Trump’s 214. To secure the White House, 270 electoral votes are needed.
The spectre of a contested election continues to loom large after President Trump tweeted: “We are up BIG, they are trying to STEAL the Election. We will never let them do it. Votes cannot be cast after the Polls are closed!”
We are up BIG, but they are trying to STEAL the Election. We will never let them do it. Votes cannot be cast after the Polls are closed!
— Donald J. Trump (@realDonaldTrump) November 4, 2020
And before the close of trading, Trump’s campaign said it is suing to temporarily stop the vote count in Pennsylvania, claiming there is a lack of transparency. They also filed a lawsuit to halt the vote count in Michigan and said they would file for a recount in Wisconsin.
On Wall Street though, cooler heads were prevailing.
“The results are not yet clear, but so far President Trump has outperformed polls in most states,” Alec Phillips, a Goldman Sachs analyst said in a Wednesday morning note.
A Democratic majority in the Senate looks less likely as well, he added.
“For fiscal policy, Senate control is at least as important as the White House. Under a narrow Republican Senate majority, we would expect no major tax increases but also a fiscal stimulus package of less than $1 trillion,” Phillips said.
Robard Williams, senior vice president at Moody’s Investors Service, expressed confidence that even a contested vote count would not inflict long-term damage on US credit markets.
“While the lack of an immediate conclusion to the election process may increase financial market volatility, our assumption is that US institutions will eventually resolve the delays in vote counting and any subsequent disputes over the results in a manner that is consistent with the established frameworks around the rule of law without causing any meaningful, enduring credit impact,” he wrote.
While the outcome of the US presidential race remains a cliffhanger, investors do have clarity on a key ballot measure in California.
A blow to gig economy workers turned into a big win for Uber and Lyft after Californians overwhelmingly voted in favour of a ballot measure exempting app-based ride-hailing and delivery services from classifying drivers as employees eligible for benefits and job protections.
The win enables Uber and Lyft to preserve their business model that relies on keeping drivers classified as independent contractors.
Shares of Uber finished the session up 14.59 percent, while Lyft shares gained more than 11 percent.