Stocks and index ETFs are scrambling higher on Tuesday with investors eager for the results of a heated U.S. presidential election.
The Dow Jones Industrial Average gained 650 points higher, or 2.5%, the S&P 500 advanced 2.26%, and the Nasdaq Composite climbed 2.12%, prompted by a sea of mostly green stocks.
With nearly all sectors in the positive in late morning trading, major stock ETFs are making considerable gains as well. The SPDR Dow Jones Industrial Average ETF (DIA), SPDR S&P 500 ETF Trust (SPY), and Invesco QQQ Trust (QQQ) are all gaining ground in just before noon EST Tuesday, adding over 2% apiece. The iShares Core S&P 500 ETF (IVV) advanced 2.31% as well.
With the majority of the stock market higher Tuesday, analysts believe that investors are hoping for a smooth election that avoids any major challenges or issues.
“Ultimately, the markets want clarity, and the main threat to risk assets this week is the emergence of a contested election, so if races are tight enough for campaigns to sue to halt or extend recounts, expect a reversal of this morning’s rally,” Tom Essaye, Founder of The Sevens Report, wrote in a note.
Latest Poll Numbers
As voters headed to the polls for Tuesday’s election, former Vice President Joe Biden maintained a lead in national polling over President Trump.
“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 RealClearPolitics places former Vice President Biden in front by 6.7 percentage points on Election Day, while a report from the data aggregator has Biden winning in critical battleground states by 2.3 percentage points.
One of the hotly debated topics leading up to the election has been whether mail-in ballots should be permitted. Many states even elected to send mail-in ballots to people who have not requested one. About 60 million voters mailed their ballots in as a result of the coronavirus pandemic, according to the U.S. Elections Project. This surfeit of mail-in voting has elevated concern over the potential for a delayed election result, which could be problematic for investors and markets.
“A declared winner would certainly be better for these markets, agnostic of who it is,” said Art Hogan, Chief Market Strategist at National Securities. “If we wake up tomorrow and we don’t have a clear winner, that shouldn’t surprise the market. But if we’re talking about this in the middle of next week and about court cases and recounts, that’s going to be the worst-case scenario.”
On Monday, stocks and index ETFs rallied higher, recovering some of their worst losses from the previous week.
“As the election finally nears, investors who were selling on the rumor may now be buying on the news, and finally, after almost a 10% decline in the last month, buying on the dip is back,” Jim Paulsen, Chief Investment Strategist at the Leuthold Group, told CNBC.
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