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After a wild election night sowed confusion across U.S. markets, investors frantically bid up stocks Nov. 4, sending major averages to the biggest rallies in five months, as they grew more confident that the tightly contested outcome would ensure key elements of the bull market remain intact for years to come.

A narrow victory by either Democratic challenger Joe Biden or President Donald Trump, coupled with a split legislature, will make it unlikely that Trump’s 2017 corporate tax cuts — an important driver to stock gains — are rolled back, as Biden has pledged to do. The failure by the Democrats to clearly sweep Congress and the White House does pare back bets that traders had made on a massive fiscal stimulus package, though some aid remains likely this year. At the same time it adds to pressure on the Federal Reserve, another crucial force behind the bull market, to pump money into an economy that was throttled by the pandemic.

The fading prospects for a multitrillion-dollar package also prompted investors to bid up Treasury bonds amid a diminishing of inflationary pressures, sending yields lower by the most since April. The Nasdaq 100 surged more than 4% in its best rally since April. Financial and industrial shares lagged behind as investors turned from companies that are most closely tied to the economy’s prospects.

CURRENT STOCK PRICES: For trucking, logistics companies

“Part of what is going on is tech is rallying strongly, which is pushing the market up, and the reason tech is rallying is because it sold off, it was uniquely exposed to higher yields, higher taxes,” said Alicia Levine, chief strategist at BNY Mellon Investment Management. “That created a viscous reversion trade into cyclicals with the expectation yields were moving up with the prospect of further stimulus.”


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The 10-year Treasury yield tumbled below 0.80% as traders cheered the prospects for less debt-funded spending. Still, a private payrolls report on Nov. 4 fell short of estimates and the services sector expanded at the slowest pace in five months. With millions of votes in battleground states still being counted, and close contests in several key states, the presidential outcome may not be decided for days, or longer. The Trump campaign said it is suing in Pennsylvania and Michigan to halt vote counts that were trending toward Biden. It’s clear that the election is turning out to be messier and more drawn-out than Wall Street had hoped.

“There will be very little cooperation on fiscal policy, very little cooperation relative to policy related to containing COVID, very little cooperation on infrastructure, or basically anything that will stimulate the economy,” said George Pearkes, Bespoke Investment Group’s global macro strategist. “If that’s the case, then what we’ve got is a repeat of the last recovery, almost to the letter.”

Meanwhile, Uber Technologies Inc. and Lyft Inc. jumped after California voters approved a measure to protect the companies’ business models from efforts to reclassify their drivers in the state as employees.

Back in global markets, the dollar weakened against many of its major peers, while gold slipped. In Asia, Alibaba Group Holding Ltd. tumbled 7.5% in Hong Kong after China halted the initial public offering of Ant Group Co., in which Alibaba owns about a one-third stake.

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