US economy

Dow jumps more than 400 points as election rally gains steam on prospect of Biden win, split Congress

Paul Davidson


Stocks rallied for a fourth day Thursday as Democrat Joe Biden edged closer to victory in the presidential race and Republicans appeared likely to hold the Senate, raising the odds of continued split government.

“I think we’re getting closer to clarity,” says J.J. Kinahan, chief market strategist for TD Ameritrade.

In early trading, the Dow Jones industrial average was up about 480 points to 28,1328 The Standard & Poor’s 500 index rose 2% to 3,513. And the tech-heavy Nasdaq climbed 2.5% as it neared 12,000.THe S&P 500 has surged 7.4% this week, more than recovering last week’s 5.6% loss.

Also partly fueling Thursday’s rally was news of last week’s jobless claims, Kinahan says. The broad gauge of layoffs in the U.S. dipped to a still elevated 738,000 while continuing claims – a measure of those still unemployed – fell by 538,000 to 7 million. The data was released ahead of a Federal Reserve meeting that’s expected to keep the central bank’s key interest rate near zero.

After capturing Michigan and Wisconsin Wednesday, as well as Arizona by most projections, Biden stands at 264 electoral votes and is just one state away from corralling the 270 needed to win the White House.

Investors had worried about a drawn-out, contested election that creates prolonged uncertainty. While President Trump has filed lawsuits over vote counting in Michigan, Pennsylvania in Georgia, analysts say they stand little chance of throwing the election into serious doubt.

More clarity on the election also brings Congress closer to a new relief package that’s likely to provide more aid for unemployed Americans and struggling businesses, bolstering an economy that has only partially recovered from the unprecedented financial distress inflicted by the COVID-10 pandemic. Although a Democratic Senate likely would pass a more robust measure of about $2 trillion, economists are still expecting Biden and a split Congress to approve a roughly $1.5 trillion bill.

At the same time, the chances of Biden making good on promises of higher taxes on the wealthy and corporations are slim without a Democratic majority in the Senate, Kinahan says.

“We’re going to get a divided Congress,” Kinahan says. “Nothing is going to change in a huge way.”

The split, he says, also reduces the chances of new regulations on big technology companies such as Facebook, Twitter and Google.

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An expectation that Biden has a chance of winning also has raised hopes that U.S. foreign policies might be “more clear,” said Jackson Wong, asset management director of Amber Hill Capital. He added, “investors are cheering for that. That’s why the markets are performing well.”

But while most markets have rallied since Tuesday’s election rising coronavirus counts, job losses and recessions remain a dark backdrop for many countries.

Britain’s FTSE 100 edged up 0.1% to 5,893.80 as England began a four-week lockdown Thursday that will keep closed all shops selling items deemed to be non-essential, such as books and clothes. Scotland, Wales and Northern Ireland also have announced wide-ranging restrictions on economic activity.

The Bank of England increased its monetary stimulus by a bigger than anticipated 150 billion pounds ($195 billion) to help the economy weather the new lockdown measures. But as expected it kept its benchmark interest rate at an ultra-low 0.1%.

In Paris, the CAC 40 gained 1% to 4,969.79, while Germany’s DAX also gained 1% to 12,449.54.

The future for the S&P 500 gained 1.4% and the future for the Dow industrials was up 1%.

Thursday’s rallies followed a strong performance overnight on Wall Street, where the S&P 500 rose 2.2% for its best day in five months. The Nasdaq notched its biggest gain in more than six months as traders doubled down on technology stocks that are seemingly immune to pandemic shocks that bring more and more activity online.

In Asia on Thursday, Hong Kong’s Hang Seng surged 3.3% to 25,695.92 while Tokyo’s Nikkei 225 index climbed 1.7% to 24,105.28. South Korea’s Kospi jumped 2.4% to 2,413.79. In Australia, the S&P/ASX 200 gained 1.3% to 6,139.60. The Shanghai Composite index rose 1.3% to 3,320.13.

Shares also rose in Taiwan and Southeast Asia.

Indonesia’s stock benchmark rose 3% after the government reported the country fell into recession for the first time in two decades in the past quarter. The economy, Southeast Asia’s largest, shrank at at 3.49% annual rate in July-September, though that was an improvement over the 5.3% contraction in the previous quarter.

Looking ahead, continued Republican control of the U.S. Senate may further stymie an agreement on a fresh infusion of aid for the economy following the expiration of an earlier package of stimulus measures in July. That could add to pressures on the Federal Reserve to do even more on its own to support the economy, which could send the dollar lower against the euro and other currencies.

The Fed is meeting this week and had been due to announce its latest decision on interest rate policy on Thursday. But it may hold off on determining whether and how to expand its economic support until after final election results are confirmed.

In other trading:

U.S. benchmark crude oil lost 31 cents to $38.84 per barrel in electronic trading on the New York Mercantile Exchange. Overnight, it gained $1.49 to $39.15 per barrel. Brent crude, the international standard, gave up 27 cents to $40.96 per barrel.

The U.S. dollar edged up to 104.27 Japanese yen from 104.26 yen. The euro strengthened to $1.1782 from $1.1736.

Contributing: Associated Press


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