A new coronavirus stimulation agreement is still being made between Democrats and Republicans, as they cannot agree on a conclusion.
US equities futures fell on Thursday night, with investors taking a breather after the post-election rally took stocks up for its best week since April.
Dow Jones industrial average futures fell nearly 200 points after President Donald Trump questioned the integrity of the US election without evidence. Though futures quickly eased losses.
Dow futures fell 100 points by 7:45 p.m. ET on Thursday. Before that, during regulatory hours, the blue-chip index closed up nearly 550 points for the fourth consecutive day.
S&P 500 futures are down 0.4 percent in after-hours trading. The broad stock index jumped 1.9% on Thursday, pushing it to 7.4% for the week. That would be the best week since the market soared out of the crater created in February and March due to a fear of a coronavirus pandemic.
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The market is banking on Tuesday’s election leading to parliamentary split of control, which could mean lower tax rates, lighter regulation for business and other policies that investors Thought still remains the status quo. It is not yet clear who will be president, although Democrat Joe Biden is getting closer to the required 270 electoral votes as counting continues in several key states.
“Gridlock has historically been an active financial market because it suggests doing business as usual,” said Gene Goldman, chief investment officer at investment advisor Cetera Investment Management.
Biden has won 264 electoral votes, and Trump has 214. Races remain tight in Pennsylvania, Georgia, Arizona and Nevada.
Investors see a reason for optimism if Biden or Trump eventually wins the presidency and what they want above all else is to just let a clear winner show up. The strategists at Barclays write in a report “more fear of uncertainty than actual outcome.
The split control over Washington also has downsides. Gridlock could reduce the chance the US government will work together in an agreement to deliver a massive stimulus.
“On the new stimulus issue, this could mean continuing inactivity, making investors more nervous,” Goldman said.
Technology stocks have helped fuel a stock rally this week, as they’ve been through a pandemic and for years before that. The growing expectation that Republicans can hold the Senate are alleviating investors’ worries that a Democratic-controlled Washington will strengthen antitrust laws and pursue Big Tech more aggressively.
However, many analysts warn that volatility could be ahead. Big upheavals may return when the threat of a long, controversial election remains.
Trump’s campaign has presented legal challenges in a number of pivotal countries, though it’s not clear if they can turn the race in his favor. A protracted court battle without an apparent winner can increase uncertainty and drag stocks down, analysts say.
The pandemic continues to weigh on economies around the world, with case rates rising at alarming rates across much of Europe and the United States. Some European governments have put restrictions on businesses in hopes of slowing the spread.
The US bond indexes and yields held steady on Thursday after the Federal Reserve released the latest monetary policy update. The central bank has said it will leave prime rates at a record low near zero. It also reaffirms their willingness to do more if needed to support the economy under threat from the daily coronavirus epidemic. more and more severe.
“There has been a lot of discussion that more stimulus will be needed from the Fed in the future,” said Brian Price, head of investment management at investment consulting firm Commonwealth Financial Network. , said in a note.
“At this point, it seems unlikely that a green wave will come true and the market may be looking for the Fed to do more to stimulate the economy in the future,” he added.
Contribution: Associated Press
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