Stock Markets Traded in the Green. What Caused the Rally?

Stocks markets rallied on Thursday as investors rushed back into health-care and technology firms on bets that the U.S. election results will trigger no major regulatory changes or tax hikes that would derail the sector.

Nasdaq 100 futures skyrocketed by another 2.6% after the underlying gauge jumped on Wednesday when the vote count couldn’t produce a clear Democratic victory as some analysts had expected. Treasuries surged higher, and the greenback lowered again on Thursday due to the reduced likelihood of a multi-trillion-dollar stimulus package.

However, the Stoxx Europe 600 index rallied thanks to increases in tech shares and some strong corporate results. Dialog Semiconductor Plc and other chipmakers were among the biggest victors. Qualcomm Inc. released an upbeat forecast on demand for 5G devices. After that, the stock skyrocketed by 15% in the pre-market.

Overall, futures on the S&P 500 Index jumped by 1.8%, while the Stoxx Europe 600 Index surged forward by 0.8%. The MSCI Asia Pacific Index also gained 2.4%, and the MSCI Emerging Market Index soared by 2.5%.

Investors are betting on a divided Congress to leave President Donald Trump’s corporate tax policy unchanged, simultaneously pursuing lighter-touch regulation of the tech sector. A divided legislature narrows the scope for a big stimulus package. However, investors may see room for more aggressive action from the Fed to pour money into an economy still struggling from Covid-19.

The Federal Reserve will probably hold off from any major changes. It plans to announce its policies later today even though the U.S. election is still in the balance.

What do analysts think?

Anna Han, the equity strategist at Wells Fargo Securities LLC, stated that up until about last week, the consensus belief was a full blue sweep. However, that’s changing now, and investors see a repricing taking place in the market. There is a boost today because a more status quo focused Senate will likely ease the burden of regulations on the technology sector.

Thus far, Joe Biden won Wisconsin and Michigan. That wins put him on the brink of taking the White House from Donald Trump. In battleground states, some votes are still being counted. Meanwhile, the president’s team opened legal fights to hinder vote-counting in the least two states.

In Europe, U.K. government bonds reversed an early advance as traders shifted their focus to a slower pace of debt-buying, which the Bank of England’s new asset-purchase targets implied. Bitcoin surged forward by more than $750 to $14,793, doubling its value in 2020 for the first time.