By Mark DeCambre and Sunny Oh
U.S. stocks rallied for a second day Tuesday as investors braced for the outcome of the presidential elections that could frame economic policy and markets in the coming four years.
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -1.50% rose 554.98 points or 2.06% today to 27480.03, while the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.48% gained 58.92 points or 1.78% today to 3369.16. The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.56% advanced 202.96 points or 1.85% today to 11160.57.
The Dow saw its largest one day point and percentage gain since Tuesday, July 14, 2020 and its best election day performance since 2008.
On Monday , the Dow rose 423.45 points, or 1.6%, to finish at 26,925.05. The S&P 500 gained 1.2%, up 40.28 points, closing at 3,310.24. The Nasdaq Composite advanced 46.02 points, or 0.4%, ending at 10,957.61, after flipping between positive and negative.
The market’s bounce back from the worst week since March was supported by hopes for a clear-cut election outcome, with opinion polls leaning toward a victory by former Vice President Joe Biden over President Donald Trump, analysts said.
Investors remain worried though about the possibility that results won’t be known for days or weeks, which could inject fresh volatility into stocks.
“Today’s gains, coupled with Monday’s rise, seems to be reflecting a slightly higher probability that we may avoid a contested election result. We don’t think an immediate, clear winner is a foregone conclusion at this point,” said Angelo Kourkafas, investment strategist at Edward Jones.
The possibility of the Democrats taking control of the Senate and further financial relief for businesses and individuals hit by the COVID-19 pandemic was also bullish, analysts said
“At present, it appears that markets are modeling clear party line wins with either Trump and Senate winning for the GOP or Biden completing the full Blue Wave sweep,” said Boris Schlossberg, managing director at BK Asset Management.
“Few are considering the very unpleasant implications of a split government with Biden winning the presidency and the Senate remaining red,” he said, in a note. “Under such conditions, there is very little chance that any meaningful legislation will pass, and the prospect of stimulus will be far less pronounced which likely to lead to lower equity prices as investors begin to realize that fiscal support won’t be coming. ”
An average of national polls from FiveThirtyEight had Biden ahead by 8.4 percentage points on Election Day.
Investors are also paying close attention to the Senate, where Democrats are seen having a chance at taking control given a large number of vulnerable Republican-held seats up for election this year.
”To gain a simple 50-seat majority, Democrats will need to pick up seats in Arizona, Colorado, Maine and North Carolina (they are expected to lose a seat in Alabama),” wrote analysts at Nomura in a strategy note referencing data aggregated by Politico .
”To gain a ‘working majority’ of 52 or more, Democrats will need to win in Georgia, Iowa, Montana or South Carolina – four states that are traditionally Republican,” the Nomura analysts wrote.