US equity indexes reached fresh intraday record highs, government bond yields surged, and the dollar strengthened after Republican presidential nominee Donald Trump defeated his Democratic opponent Kamala Harris in Tuesday's vote. The Dow Jones Industrial Average skyrocketed 3.3% to 43,617.9, with the S&P 500 climbing 2.2% to 5,911.4 and the Nasdaq Composite rising 2.5% to 18,901.1.
Financials, energy, and industrials led the gainers, while the sole decliners included real estate, utilities, and consumer staples. Trump becomes the second individual in US history to hold the presidency in non-consecutive terms after Grover Cleveland's re-election in 1892. The Republican Party is on the verge of a clean sweep in Congress after successfully reclaiming the Senate. "Markets appeared to be expecting a continuation of Trump's deregulation policies from 2016-2020, as well as the potential for lower taxes," stated Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute.
"US large cap equities could benefit from a combination of deregulation and potentially additional tax cuts. Smaller, domestic-oriented companies should find an advantage from tariffs on imports." The US dollar strengthened against major trading partners following the electoral outcome, evidenced by a 1.6% surge in the US Dollar index to 105.12.
This development comes ahead of a policy announcement from the Fed's rate-setting panel, the Federal Open Market Committee, occurring on Thursday. CME's FedWatch tool currently indicates a 99% likelihood of a 25 basis point interest-rate cut being anticipated for Thursday's FOMC meeting, placing the target range at 4.5% to 4.75%.
The alternative scenario suggests a pause in the Fed's cycle of policy easing, which commenced in September with a 50 basis point reduction. Most US Treasury yields experienced an uptick, with the 10-year yield rising 14.9 basis points to 4.44%, and the two-year rate increasing by 7.1 basis points to 4.27%.
Regarding the economy, mortgage applications declined by 10.8% in the week ending Nov. 1, primarily due to a rise in mortgage rates to their highest level since July, as per data released Wednesday from the Mortgage Bankers Association. This drop follows a slight 0.1% decrease in overall activity in the week ending Oct.
25. In corporate news, Super Micro Computer ($SMCI) shares plummeted 23.1% intraday, making it the worst performer on both the S&P 500 and the Nasdaq, as fiscal Q2 guidance fell short of analysts' predictions. The company also remains overdue on its form 10-K filing for the fiscal year concluded on June 30. Wedbush analysts noted that Trump's presidency could benefit Big Tech and Tesla ($TSLA) by promoting significant initiatives in artificial intelligence, likely reducing regulatory barriers, and providing Tesla a competitive advantage if the US government cuts subsidies for electric vehicles and increases tariffs on China.
Consequently, shares of Tesla surged 14.2% intraday, leading the Nasdaq. West Texas Intermediate crude oil increased by 0.1% to $72.05 per barrel. Meanwhile, gold prices fell by 2.8% to $2,671.80 an ounce, and silver experienced a decline of 4.7%, settling at $31.24 an ounce..