Stock futures opened higher Sunday evening as traders took in President-elect Joe Biden’s victory in the U.S. presidential election, ending a days-long nail-biter over which candidate would prevail in winning the White House.
Contracts on the Dow jumped more than 100 points, or about 0.5%, as the overnight session kicked off, setting the index up to extend its sharp gains from last week. Stocks had rallied in the run-up to Biden’s win, which was called by the Associated Press on Saturday. The S&P 500 posted a weekly advance of more than 7% for its best week since April, and technology and health-care stocks led the gains.
Biden, alongside Vice President-elect Kamala Harris, is set to usher in a push for bigger fiscal stimulus, a public option in health care, investment in sustainability, and a more measured approach to foreign policy and trade, among other key issues. And in his victory speech Saturday, Biden promised to work toward these goals with an eye toward uniting a deeply divided nation, calling for an end of “this grim era of demonization in America” and underscoring that “if we can decide not to cooperate, then we can decide to cooperate.”
So far, traders have cast bets that some of the suspected “market negative” potential of a Biden presidency, such as a move to raise corporate taxes, would be tempered by a Senate that remained under Republican control. Two Senate races remain outstanding in Georgia and will not be decided until January, though prediction markets have so far given Democrats relatively slim odds of winning both seats needed for the party to claim a majority in the chamber.
“A divided government would constrain the Biden administration’s ability to implement plans for large-scale fiscal stimulus and public investment, tax, healthcare and climate related legislation,” analysts from BlackRock Investment Institute said in a note Saturday. “We see an increased focus on sustainability under a divided government, but through regulatory actions, rather than via tax policy or spending on green infrastructure. It also would likely signify a return to more predictable trade and foreign policy – even as U.S.-China rivalry is set to stay elevated due to bipartisan support for a more competitive stance.”
The analysts added that “some fiscal stimulus looks possible” during the lame-duck session in Congress, though the size and scope of any forthcoming package is likely to be much smaller than what a united Democratic government might have advanced.
“We’re monitoring the fiscal response closely, as a premature retrenchment could set back an economic restart that has so far surprised to the upside,” they said.
Other economists also expressed optimism that a stimulus package might get passed ahead of Inauguration Day, even after the months’ worth of discussions between Trump administration officials and congressional lawmakers fizzled out without an agreement.
“We are becoming increasingly hopeful that pressure from business leaders and vulnerable Republican Senators in 2022 will mean that something can pass before the end of the year, and very preferably before the end of the month,” Ian Shepherdson, chief economist for Pantheon Macroeconomics, said in a note Sunday.
Meanwhile, for the high-flying tech stocks that have driven the market higher for much of this year, a Biden presidential victory with a likely Republican Senate poses the “goldilocks Election outcome,” according to WedBush analyst Dan Ives.
“Investors should expect a ratcheting down of US/China tensions and the ‘decoupling path’ of the Cold Tech war, which is a bullish sign for Apple (AAPL) and semi [semiconductor] stocks looking ahead,” Ives said in a note Saturday. Concerns of a tougher antitrust environment for Big Tech companies have also likely eased, he added.
Biden is also set to strike a more serious tone on combatting the coronavirus pandemic, with the outbreak having already taken the lives of more than 230,000 Americans, sickened more than 9.8 million and dragged U.S. economic activity to a historic nadir. And while vote counts were under way last week, coronavirus cases hit a grim milestone in the United States: A record more than 120,000 new cases reported on Friday alone. Biden is set to announce a new 12-person coronavirus task force on Monday, as one of his first major acts during his presidential transition, according to reports from Axios and CNN.
6:01 p.m. ET Sunday: Stock futures open higher after Biden named winner of presidential election
Here were the main moves in markets, as of 6:01 p.m. ET Sunday evening:
S&P 500 futures (ES=F): 3,517.00, up 16.25 points or 0.46%
Dow futures (YM=F): 28,334.00, up 130 points or 0.46%
Nasdaq futures (NQ=F): 12,141.5, up 66.5 points or 0.55%