U.S. stocks rallied Tuesday as voters headed to the polls on the last day of the presidential election and as more data piled up showing the economy remains solid.
The S&P 500 rose 1.2% to pull closer to its record set last month. The Dow Jones Industrial Average climbed 427 points, or 1%, while the Nasdaq composite gained 1.4%.
The market's main event was the election, even if the result may not be known for days or weeks as officials count all the votes. Such uncertainty could upset markets, along with an upcoming meeting by the Federal Reserve on interest rates later this week. The widespread expectation is for it to cut its main interest rate for a second straight time.
Investors have already made moves in anticipation of a win by either former President Donald Trump or Vice President Kamala Harris. But Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute, suggests not getting caught up in such pre-election moves, or even those immediately after the polls close, “which we believe will face inevitable tempering, if not outright reversals, either before or after Inauguration Day.”
Dow futures were up 0.7%, those in the S&P 500 were up 0.6% and those in the Nasdaq rose 0.4% as of 8:20 p.m. Eastern time as election returns were coming in.
Trump won Florida, a one-time battleground that has shifted heavily to Republicans in recent elections. He also notched early wins in reliably Republican states such as Kentucky, Tennessee and Indiana, while Harris took Democratic strongholds like Vermont, Massachusetts and Maryland.
In Asia, some benchmarks were moving higher in early trading Wednesday. The Nikkei 225 in Tokyo was 1.4% higher, while the Kospi in Seoul was up 0.5%. Australia’s S&P/ASX 200 added 0.8%.
Trump Media & Technology Group, the company behind the former president's Truth Social platform, tumbled 10.4% in after-hours trading. It closed 1.2% lower during the regular session, when trading in the stock was halted multiple times due to volatility. The stock, which tends to move more with Trump's re-election odds than on its own profit prospects, rallied strongly last month.
Bond yields were rising. The yield on the 10-year Treasury was at 4.35% as of 8:20 p.m. Eastern. It had earlier slipped to 4.28% from 4.29% late Monday.
Despite all the uncertainty heading into the final day of voting, many professional investors suggest keeping the focus on the long term. The broad U.S. stock market has historically tended to rise regardless of which party wins the White House, even if each party's policies can help and hurt different industries' profits.
Since 1945, the S&P 500 has risen in 73% of the years where a Democrat was president and 70% of the years when a Republican was the nation’s chief executive, according to Sam Stovall, chief investment strategist at CFRA.
The U.S. stock market has risen more in magnitude when Democrats have been president, in part because a loss under George W. Bush’s term hurt the Republicans’ average. Bush took over as the dot-com bubble was deflating and exited office when the 2008 global financial crisis and Great Recession were devastating markets.
Besides who will be president, other questions hanging over the market include whether the White House will be working with a unified Congress or one split by political parties, as well as whether the results will be contested.
The general hope among investors is often for split control of the U.S. government because that’s more likely to keep the status quo and avoid big changes that could drive the nation’s debt much, much higher.
As for a contested election, Wall Street has some precedent to look back to. In 2000, the S&P 500 dropped 5% in about five weeks after Election Day before Al Gore conceded to George W. Bush. That, though, also happened during the near-halving of the S&P 500 from March 2000 to October 2002 as the dot-com bubble deflated.
Four years ago, the S&P 500 rose the day after polls closed, even though a winner wasn't yet clear. And it kept going higher after Trump refused to concede and challenged the results, which created plenty of uncertainty. A large part of that rally was due to excitement about the potential for a vaccine for COVID-19, which had just shut down the global economy.
The S&P 500 ended up rising 69.6% from Election Day 2020 through Monday, following President Joe Biden’s win. It rallied to records as the U.S. economy bounced back from the COVID-19 pandemic and managed to avoid a recession despite a jump in inflation.
In the four years before that, the S&P 500 rose 57.5% from Election Day 2016 through Election Day 2020, in part because of cuts to tax rates signed by Trump.
On Tuesday, excitement about the artificial-intelligence boom helped lift Wall Street following a strong profit report from Palantir Technologies. So did a report showing growth accelerated last month for U.S. services businesses, beating economists’ expectations for a slowdown.
The Institute for Supply Management said it was the strongest growth in more than two years. The report offered more hope that the U.S. economy will remain solid and avoid a long-feared recession following the worst inflation in generations.
Palantir jumped 23.5%. CEO Alexander Karp said, “We absolutely eviscerated this quarter, driven by unrelenting AI demand that won’t slow down.”
All told, the S&P 500 rose 70.07 points to 5,782.76 on Tuesday. The Dow gained 427.28 to 42,221.88, and the Nasdaq composite rallied 259.19 to 18,439.17.
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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.