Inventory futures rise in unstable buying and selling as US election outcomes arrive with no clear winner
Stock futures rose in volatile trading on Tuesday night when the presidential election results came in with no clear winner. Futures for the Nasdaq 100 index, which is home to many technology stocks, performed better.
Nasdaq 100 futures traded 2.6% higher. At the beginning of the session, these contracts increased by more than 3%. S&P 500 futures were up 0.9%. Dow Jones Industrial Average futures alternated between strong gains and losses. At about 11:50 p.m. ET, they rose 48 points, or 0.2%.
As the night progresses it becomes clear that there will be no call to the presidential race on election night.
Democratic nominee Joe Biden seemed unable to take Florida or North Carolina, with President Donald Trump taking the lead in those two states, according to NBC News. Determining the major swing states Michigan, Wisconsin, and Pennsylvania could take days.
“It’s early days and stock futures are likely to remain volatile all night, but right now the market feels poised to get a better result than expected – that a runaway big-margin Biden win is off the table “said David Bahnsen, Chief Investment Officer of the Bahnsen Group.
Other financial markets spun when the results came in:
- Bonds returned higher and the yield on the 10 year Treasury note fell to 0.81%. (The returns move inversely to the prices.)
- Futures for the small-cap benchmark Russell 2000 fell 0.4% after rising earlier.
- The US dollar index rose 0.4% after a previous decline. The greenback also hit its highest level since October 2 against the Chinese yuan.
- US oil futures gained 1.9%.
So far, Trump will win the Indiana and Kentucky presidential elections along with the NBC News projects in South Dakota, Arkansas and Ohio. Trump is also expected to win Alabama and North Dakota. According to NBC News, Biden is slated to win Vermont, Delaware, Maryland and Massachusetts, as well as Colorado, New York and Virginia.
“We see in one night what we’ve seen for the past two weeks. This is a tug-of-war within the survey itself that, if uncertainty persists, results in large market volatility,” said Keith Lerner, chief market strategist at Truist / SunTrust Advisory.
Treasury Secretary Steven Mnuchin told CNBC’s Kayla Tausche that a few hundred participants watched the election results in the East Room and described the atmosphere as “great”.
During Tuesday’s regular trading session, the Dow was down more than 500 points, or 2.1%. The S&P 500 was up 1.8% and the Nasdaq Composite was up 1.9%. These gains contributed to Monday’s strong performance.
This week’s market moves come as investors hoped a late or controversial US presidential election result is avoided and a clear winner emerges Tuesday night.
“This recent price surge appears to be a ‘rally of clarity’ as investors look forward to finally clearing up the excess of election uncertainty,” Vital Knowledge founder Adam Crisafulli wrote in a note Tuesday.
Biden was ahead of Trump in the polls before Tuesday. Wall Street is also watching some key races to see which party can take control of the Senate.
Some investors bet on what is known as a blue wave, a scenario in which Democrats win the White House and retake a Senate majority. Some of these investors had switched out of technology stocks thinking the Democrats would impose higher taxes that would hit those stocks. The theory is that investors would sell successful tech stocks before higher capital gains taxes were introduced. A Trump victory would mean that this scenario is unlikely to happen.
According to Baird, the S&P 500 lost an average of 0.4% the day after the presidential election.
Chao Ma of the Wells Fargo Investment Institute believes investors with a longer time horizon shouldn’t worry too much about the impact of the election on the broader market.
“The history of the economy and the S&P 500 Index suggest that a president’s party affiliation made little difference in terms of long-term returns,” said the company’s global portfolio and investment strategist. “The long-term drivers of the S&P 500 index have been economic and business gains, and we expect this will continue after the 2020 elections.”
A year after the presidential election, the S&P 500 achieved an average return of more than 8%, according to Baird in 1960.
– CNBC’s Pippa Stevens contributed to this report.
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