Wall Street extends gains with election stalemate in focus

Stocks jumped Thursday to extend a rally from a day earlier, as traders honed in on the outcome of the U.S. election, with several key states’ results still hanging in balance.

As of Thursday morning, several key states including Pennsylvania and Nevada had yet to be called in favor of either candidate. The latter state is not set to resume tabulations again until about noon eastern on Thursday, with a large proportion of votes still outstanding.

Former Vice President Joe Biden had 264 electoral votes and President Donald Trump had 214, according to the Associated Press, with Biden only needing to win one more of the outstanding states where he is leading to win the presidency. Candidates require 270 electoral votes to be named the winner of the election.

  • States called for Trump: Ky., W. Va., S.C., Ala., Miss., Tenn., Okla., Ark., Ind., N.D., S.D., Wyo., La., Neb. (4 of 5 electoral votes), Kan., Mo., Idaho, Utah, Ohio, Iowa, Mont., Fla., Texas

  • States called for Biden: Vt., Va., Conn., Del., Ill., Md., Mass., N.J., R.I., N.Y., N.M., D.C., Colo., N.H., Calif., Ore., Wash., Hawaii, Minn., Ariz., Maine (3 of 4 electoral votes), Wis., Mich.

In the Senate races, however, Democrats looked on track to net just a single new seat, leaving a high likelihood that Republicans would maintain control of the chamber.

Equity markets rallied strongly amid the apparent lack of a Democratic sweep of both the White House and Senate. While the divided government outcome lowered the likelihood that a major stimulus package would be passed in the near-term, it raised odds that sectors and companies at risk of being impacted by new regulations and sweeping policy changes under a Democratic majority would come out untouched.

The tech-heavy Nasdaq surged more than 3.8% for its best session since April on Wednesday, and health-care and technology stocks led the 2.2% jump advances in the S&P 500. But elsewhere, bank stocks tumbled alongside Treasury yields, as anticipation of greater government spending was also unwound.

“What Wall Street wants more than everything is for nothing to happen in Washington. There is so much of a bias for a static policy environment – that you can actually make business decisions and have those decisions hold the test of time beyond a couple of years. And so more gridlock in Washington tends to be better,” Stephanie Miller, managing director of FiscalNote Markets, told Yahoo Finance Wednesday afternoon.

“The long-term bet on stability is what we’re all seeing, and that really checks out under either presidential scenario,” she added.

Other analysts agreed with this assessment. Based on a Jefferies analysis, periods of divided government led by a Democratic president led to an average gain for the S&P 500 of 33.9%, according to data spanning back to 1989. Periods with a unified government under a Democratic president averaged a 22.5% return, based on data over the same period.

Also on the radar is U.S. economic data. On Thursday, the Labor Department reported that U.S. states saw another 751,000 Americans file first-time unemployment benefits last week, as still-elevated coronavirus case counts threaten to weigh on the pace of recovery in the labor market. The figures are a harbinger for Friday’s nonfarm payrolls report.

Investors at least temporarily looked past the potential for a protracted battle for the White House. President Donald Trump’s campaign on Wednesday was already preparing to file lawsuits in the battleground states of Pennsylvania, Michigan and Georgia to challenge vote counts, and earlier in the day said it would seek a recount in Wisconsin, which was called for Biden.

9:31 a.m. ET: Stocks open sharply higher with election results in focus

Here were the main moves in markets, as of 9:31 a.m. ET:

  • S&P 500 (^GSPC): +54.6 points (+1.58%) to 3,497.81

  • Dow (^DJI): +392.58 points (+1.4%) to 28,238.24

  • Nasdaq (^IXIC): +210.45 (+1.82%) to 11,805.14

  • Crude (CL=F): -$0.23 (-0.59%) to $38.92 a barrel

  • Gold (GC=F): +$33.10 (+1.75%) to $1,929.30 per ounce

  • 10-year Treasury (^TNX): +0.3 bps to yield 0.771%

9:03 a.m. ET: U.S. productivity rises strongly for a second consecutive quarter in 3Q

Productivity among U.S. nonfarm workers, which tracks output per worker, increased by 4.9% on an annualized basis in the quarter ending in September, according to the Labor Department. While still a strong increase relative to the same period last year, productivity nevertheless decelerated in the third quarter compared to the second, as hours worked increased sharply. Productivity jumped by an annualized 10.6% in the second quarter, which had been the fastest increase since early 1971.

Consensus economists were looking for a 5.6% rise in productivity in the third quarter, according to Bloomberg data.

Unit labor costs, meanwhile, slid at an 8.9% annualized rate in the third quarter after an 8.5% jump in the second. This tracks the price of labor per unit of output.

8:30 a.m. ET: Jobless claims slightly worse than expected

The latest initial unemployment claims checked in slightly higher than expected in the latest week, as an additional 751,000 workers filed for benefits. A Bloomberg consensus forecasts expected 735,000, reflecting a labor market that remains scarred by the COVID-19 pandemic — and as new U.S. cases surge to their highest levels since the crisis began.

Stock futures, however, are still pointing to a sharply higher level, awaiting more news on the presidential election and Friday’s nonfarm payrolls data.

7:49 a.m. ET: Jefferies unveils 2021 S&P 500 price target of 3,750

Jefferies equity strategist Sean Darby expects stocks to go up by the end of next year.

The firm unveiled its 2021 S&P 500 price target of 3,750, implying about 8.9% appreciation from Wednesday’s closing prices. Darby, in a note Thursday, cited a more positive earnings growth outlook as reason for his call, with improving economic activity in the U.S. and abroad helping bolster corporate profits.

“The manner in which economic numbers deteriorated in 2Q has not only produced a V-shaped earnings profile but the low has occurred around mid-year,” Darby said. “Hence the 2020 earnings integer has not been the entire driver for shares but also the 2021 value.”

“We have held onto a V-shaped earnings profile for 2020 and expect the earnings integer to trend to 142 by year-end since April,” Darby said, with his earnings view 4.3 points higher than the consensus earnings for the S&P 500.

Here’s what else he had to say about his call:

Based on our economics team GDP growth and healthy expansion in China and overseas, we would expect the S&P 500 earnings integer to grow to 170 in 2021 putting the market on a forward PE [price-earnings ratio] of 20.3X. This equates to roughly 20% [earnings per share] growth in 2020-2021. We have raised the weighting of technology as the fear over tax hikes diminishes. We expect the market to reach 3,750 by end of 2021. This puts the 2021 PE multiple to be 22.1X.

7:21 a.m. ET Thursday: Stock futures jump as investors await outstanding vote tabulations

Here were the main moves in markets, as of 7:21 a.m. ET:

  • S&P 500 futures (ES=F): 3,494.00, up 59 points or 1.72%

  • Dow futures (YM=F): 28,097.00, up 362.00 points or 1.31%

  • Nasdaq futures (NQ=F): 12,061.25, up 298.25 points or 2.54%

  • Crude (CL=F): -$0.45 (-1.15%) to $38.70 a barrel

  • Gold (GC=F): -+$23.10 (+1.22%) to $1,919.30 per ounce

  • 10-year Treasury (^TNX): -2.8 bps to yield 0.74%

6:09 p.m. ET Wednesday: Stock futures flat after rally

Here were the main moves in markets, as of 6:09 p.m. ET Wednesday

  • S&P 500 futures (ES=F): 3,486.25, up 1.25 points or 0.04%

  • Dow futures (YM=F): 27,730.00, down 5 points or 0.02%

  • Nasdaq futures (NQ=F): 11,794.25, up 31.25 points or 0.27%

U.S. President Donald Trump and  Democratic presidential candidate Joe Biden's presidential debate is broadcast and watched at a tavern in San Diego, California, U.S., October 22, 2020.   REUTERS/Mike Blake
U.S. President Donald Trump and Democratic presidential candidate Joe Biden’s presidential debate is broadcast and watched at a tavern in San Diego, California, U.S., October 22, 2020. REUTERS/Mike Blake

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