A new coronavirus stimulus deal is still in the works between Democrats and Republicans, bu they can’t agree on a conclusion.
U.S. stock futures slipped Thursday evening, with investors taking a breather after a post-election surge put stocks on pace for their best week since April.
Futures for the Dow Jones industrial average briefly dropped nearly 200 points after President Donald Trump questioned the integrity of the U.S. election with no evidence. Though futures quickly pared losses.
Dow futures were down 100 points as of 7:45 p.m. ET on Thursday. Earlier, during regulator trading hours, the blue-chip index closed up nearly 550 points for its fourth straight day of gains.
S&P 500 futures dipped 0.4% in after-hours trading. The broad stock index had risen 1.9% Thursday, pushing it up 7.4% for the week. That would be its best week since the market was surging out of the crater created in February and March by panic about the coronavirus pandemic.
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Markets are banking on Tuesday’s election leading to split control of Congress, which could mean low tax rates, lighter regulation on businesses and other policies that investors like remain the status quo. It’s still unclear who will be president, though Democrat Joe Biden is pushing closer toward the needed mark of 270 electoral votes as ballot-counting continues in a number of key states.
“Gridlock has historically been a positive for financial markets because it suggests business-as-usual,” Gene Goldman, chief investment officer at investment advisor Cetera Investment Management, said in a note.
Biden has secured 264 electoral votes, and Trump has 214. Races remain tight in Pennsylvania, Georgia, Arizona and Nevada.
Investors see cause for optimism if either Biden or Trump ultimately wins the presidency, and what they want most of all is just for a clear winner to emerge. Stocks “fear uncertainty rather than the actual outcome,” strategists at Barclays wrote in a report.
Split control of Washington also carries potential downsides. Gridlock may lessen the chances of the U.S. government coming together on a deal to deliver a big shot of stimulus for the economy.
“On the matter of new stimulus, this could mean further stalls, increasing investor anxiety,” Goldman said.
Technology stocks helped power the stock rally this week, as they have through the pandemic and for years before that. Rising expectations that Republicans can hold onto the Senate are easing investors’ worries that a Democratic-controlled Washington would beef up antitrust laws and go after Big Tech more aggressively.
Still, many analysts warn volatility may lie ahead. Big swings could return as the threat of a contested, drawn-out election still looms.
Trump’s campaign has filed legal challenges in some key swing states, though it’s unclear whether they can shift the race in his favor. A long court battle without a clear winner of the presidency could raise uncertainty and drag down stocks, analysts say.
The pandemic continues to weigh on economies around the world, with case counts rising at troubling rates across much of Europe and the United States. Several European governments have brought back restrictions on businesses in hopes of slowing the spread.
The indexes and U.S. bond yields held steady on Thursday after the Federal Reserve issued its latest monetary policy update. The central bank said that it will leave its key interest rate at a record low near zero. It also reaffirmed its readiness to do more if needed to support the economy under threat from a worsening coronavirus pandemic.
“There has been a lot of discussion that more stimulus will need to come from the Fed in the future,” due to the prospect of less aggressive stimulus coming from a divided government, Brian Price, head of investment management at investment adviser Commonwealth Financial Network, said in a note.
“At this point, it does not appear likely that a blue wave will materialize, and the market might be looking for the Fed to do more to stimulate the economy in the future,” he added.
Contributing: The Associated Press
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