The U.S. stock market and dollar, Elon Musk’s Tesla, banks and bitcoin all stormed higher Wednesday as investors made bets on what Donald Trump’s return to the White House will mean for the economy and the world. Among the losers the market sees: the renewable-energy industry and potentially anyone worried about higher inflation.
The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite each ended at record levels with investors expecting lower taxes, deregulation and a U.S. president who is not shy to weigh in on everything from the stock market to the dollar, although fresh tariffs could bring challenges in the form of a higher deficit and inflation. Both the Dow and S&P 500 registered their biggest one-day percentage gains since November 2022.
Canadian stocks also rallied, with the S&P/TSX Composite Index gaining just over 1%, but gains were held back somewhat by the surge in the U.S. dollar - which pressured commodity prices - as well as a jump in bond yields, which weighed on dividend-rich sectors like real estate and utilities.
The Republican’s win powered a rally in so-called “Trump trades” and sent U.S. Treasury yields sharply higher, with the benchmark 10-year note yield hitting a four-month high of 4.479%. Canadian bond yields also rose sharply, with both the five-year and 10-year yields reaching their highest levels since July.
Bitcoin hit a record high of over US$76,000 and the U.S. dollar was on track for its biggest one-day percentage gain since September 2022.
Polls indicated a very tight race, with some concern the process could be drawn out before a victor was declared.
“Investors were kind of portfolio jockeying to score up some of their risk exposure in anticipation of an outcome that was going into it, seemingly a toss-up,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia. “And obviously, it turned very quickly and led to a very much risk-on day today in which anything that isn’t tied to the ground from a cyclical or pro-growth standpoint is absolutely launching.”
The Dow Jones Industrial Average rose 1,508.05 points, or 3.57%, to 43,729.93, the S&P 500 gained 146.28 points, or 2.53%, to 5,929.04 and the Nasdaq Composite gained 544.29 points, or 2.95%, to 18,983.47.
Financials jumped 6.16% as the best performing of the 11 major S&P 500 sectors. Banks, expected to benefit from loosening regulations under Trump, powered the gains, with the S&P 500 bank index up 10.68%, its biggest daily jump in two years.
The small-cap Russell 2000 rallied 5.84%, its biggest surge since November 2022, to a three-year high, with the domestically concentrated stocks seen as likely to benefit from easier regulations, lower taxes and less exposure to import tariffs. However, rising Treasury yields could hurt smaller companies, which tend to rely heavily on borrowing and are more sensitive to higher interest rates.
“This move up in interest rates ... if it doesn’t stall out here somewhere around this 4.4%, 4.5% level or so, and we start to retest those levels we saw last October of 5%, that could not only put small caps, but the market itself on its heels,” said Luschini.
Trump is a fan of fossil fuels, encouraging production of oil and natural gas. His win sent solar stocks sharply lower, including a 10.1% fall for First Solar and 16.8% slide for Enphase Energy.
The only stock with a bigger loss in the S&P 500 was Super Micro Computer, which said its sales for the latest quarter could come in below its prior forecast. Its stock sank 18.1%.
The CBOE Volatility Index, also known as Wall Street’s “Fear Gauge,” dropped 4.22 points to close at a six-week low of 16.27.
Rate-sensitive real estate shares, down 2.64%, and utilities, off 0.98%, were among the day’s few declining sectors on Wall Street as investors assessed the chances of Trump’s policies boosting inflation and altering the Federal Reserve’s path of interest rates, which has been a key component of Wall Street’s recent rally.
The central bank is widely expected to ease the benchmark interest rate by 25 basis points at its policy-setting meeting ending on Thursday. However, traders have begun to trim bets for a cut in December and the number of reductions expected next year, according to CME’s FedWatch Tool.
Stocks viewed as likely to perform well under a second Trump term also advanced, with Trump Media & Technology Group closing up 5.94% after a volatile session while Tesla leaped 14.75% as CEO Elon Musk has supported Trump’s reelection campaign.
Strong gains were also made by shares of cryptocurrency companies, energy firms and prison operators, while renewable energy shares fell.
Markets were also eyeing whether the Republican Party could maintain a majority in the House of Representatives after gaining control of the U.S. Senate, which would lead to less opposition to a Trump agenda.
Among commodities, metals fell the most, with gold hitting a three-week low and copper posting its biggest intraday loss in five months. The materials sector in Toronto closed down 1.77%.
Information technology led sectoral gains on the TSX with a 3% jump, supported by Bitfarms, which climbed 18% following a boost to crypto stocks after the election results.
Financials gained 1.64%. The sector benefited from IA Financial, whose shares rose 11.4% after it beat third-quarter profit estimates.
Meanwhile, shares in Canada’s major cannabis companies fell hard after the U.S. election, which saw efforts to legalize recreational cannabis in several states fail.
Shares of Canopy Growth Corp. lost 21.2% and Aurora Cannabis Inc. 15.9%.
Reuters, The Associated Press, Globe staff