Trump Victory Sparks Record-Setting Rally On Wall Street

Stocks skyrocketed during trading on Wednesday, as traders celebrated Donald Trump’s victory in the presidential election. The major averages added to the strong gains posted during Tuesday’s session, reaching new record closing highs.

The major averages saw further upside in late-day trading, reaching new highs for the session. The Dow soared 1,508.05 points or 3.6 percent to 43,729.93, the Nasdaq surged 544.29 points or 3.0 percent to 18,983.47 and the S&P 500 shot up 146.28 points or 2.5 percent to 5,929.04.

The extended rally on Wall Street came after former President Trump was declared the winner in the presidential election versus Vice President Kamala Harris.

Claiming victory in several key swing states, Trump is projected to win far more than the 270 Electoral College votes needed to secure his return to the White House.

The decisive victory helped avoid the uncertainty that would be created by a prolonged vote counting process and potential legal challenges.

Trump is also seen by the markets as better for corporations and likely to renew the tax cut package enacted during his first term, which was due to expire at the end of 2025.

A Trump administration is also expected to scale back government regulations and be less hostile to mergers and acquisitions.

However, Trump has also called for increased tariffs on China and other countries, which could lead to renewed inflation concerns.

“A side effect of tariffs and higher prices would be interest rates staying higher for longer, which would be unhelpful for the housing market which, in turn, will act as a drag on home-related categories,” said Neil Saunders, Managing Director of GlobalData.

He added, “While Trump promised lower interest rates, and wants more control over the setting of rates, it is not in his immediate gift to enact this kind of change.”

Republicans are also projected to retake control of the Senate for the first time in four years, although control of the House remains up for grabs.

With the elections now largely in the rearview mirror, traders will turn their attention to the Federal Reserve, which is due to announce its latest monetary policy decision on Thursday.

The Fed is widely expected to lower interest rates by 25 basis points, but the accompanying statement could the impact the outlook for future rate cuts.

Sector News

Financial stocks helped lead the rally on Wall Street amid optimism about reduced regulation under Trump, with the KBW Bank Index and the NYSE Arca Broker/Dealer Index soaring by 10.7 percent and 8.2 percent, respectively.

Optimism about fewer regulations also contributed to substantial strength among oil service stocks, as reflected by the 7.8 percent spike by the Philadelphia Oil Service Index.

Airline stocks also showed a significant move to the upside, driving the NYSE Arca Airline Index up by 5.8 percent to its best closing level in over a year.

Telecom, natural gas, semiconductor and software stocks also saw considerable strength on the day, while gold, commercial real estate and pharmaceutical stocks moved sharply lower.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan’s Nikkei 225 Index spiked by 2.6 percent, while Hong Kong’s Hang Seng Index plunged by 2.2 percent.

Meanwhile, the major European markets came under pressure over the course of the session. While the German DAX Index slumped by 1.1 percent, the French CAC 40 Index fell by 0.5 percent and the U.K.’s FTSE 100 Index edged down by 0.1 percent.

In the bond market, treasuries pulled back sharply in reaction to Trump’s victory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, spiked 13.7 basis points to a four-month closing high of 4.426 percent.

Looking Ahead

The Fed’s monetary policy announcement is likely to be in the spotlight on Thursday, overshadowing reports on weekly jobless claims and third quarter labor productivity and costs.