Big US tech stocks should rebound and build on strong gains from the previous day as election results so far have changed investor outlooks for the path of the American economy and interest rates.
Futures, which track the Nasdaq 100 index, which is heavily biased towards big tech names like Apple, Alphabet, and Amazon, rose 2.7 percent about two hours before New York’s opening bell. The S&P 500 futures rose 1.9 percent while long-term treasury prices rose.
Thursday’s trading was a continuation of a trend that began when the election results arrived on Tuesday night. A stronger-than-expected performance by Donald Trump in the President’s race and fading expectations Joe Biden’s Democrats will turn Senate expectations of Wall Street for a “blue wave” on its head.
Many analysts and investors had said before the election that if the Democrats took control of the White House and Congress, it would enable Mr Biden to deliver on a key campaign promise to launch a $ 2 billion infrastructure spending program, that would boost US growth and possibly boost inflation.
With the president’s race too tight and expectations of a divided Congress rising, investors have repositioned their portfolios to accommodate expectations of slower growth and more stimulus from the Federal Reserve.
“You are returning to the old growth stocks game book that will outperform,” said Jurrien Timmer, director of global macro at Fidelity.
This trend, which had also caught on earlier this year due to the pandemic, was a boon to the share prices of American tech champions. The tech-heavy Nasdaq Composite is up nearly 30 percent this year, compared to a 6.6 percent gain for the more balanced S&P 500.
The shares of Apple, Google parent Alphabet, Amazon, Microsoft and Netflix each rose by around 2 percent in pre-market trading on Thursday.
Meanwhile, investors continued to buy longer-dated US Treasuries, pushing yields down. The 10-year rate of return recently fell 0.03 percentage points to 0.74 percent after rising above 0.9 percent on Tuesday, before polls in major countries closed.
Fixed income investors were also expected to pay close attention to a Federal Reserve monetary policy statement due to be released Thursday afternoon in Washington.
Market expectations for volatility have cooled, although the president’s race has remained tight in several major battlefield states and many political analysts anticipate several days or possibly weeks of uncertainty.
“The market assumes that it will not be competitive, otherwise we would be on the heels,” said Timmer.
Eric Stein, chief investment officer for fixed income at Eaton Vance, added that investors “saw through” the period of uncertainty.
“The market seems to be saying it could get messy, but it’s not as much of a risk as people feared before.”
Additional coverage from Hudson Lockett and Thomas Hale