Stocks Climb, Extending Biggest Weekly Rally Since April

By Caitlin McCabe and Caitlin Ostroff

U.S. stocks jumped Thursday, on track for their sharpest weekly gains since April, as investors cheered the diminished prospects of higher corporate taxes under a split Congress.

The benchmark S&P 500 rose 2.2% in recent trading, a day after it logged its biggest one-day advance since June. The index has climbed 7.6% so far this week. The Dow Jones Industrial Average rose 565 points, or 2%, paring an earlier gain of nearly 650 points.

Technology shares led the charge for a second day: The Nasdaq Composite jumped 2.7%. All three indexes are on course for their best week since the period ended April 9.

Democratic candidate Joe Biden is within striking distance of the presidency, potentially bringing to an end weeks of uncertainty about the U.S. election that has weighed on markets. Republicans have won enough seats to potentially retain control of the Senate, while Democrats appear poised to hold on to the House.

Investors' anticipation of a divided government -- which could make it more difficult to accomplish major legislative overhauls, including raising corporate taxes and regulating technology companies -- has fueled sustained optimism on Wall Street this week.

The S&P 500 and Dow are both on pace for their fourth consecutive gain of 1%, the longest such streak for both indexes since October 1982. The S&P 500 and Nasdaq were within 4% of their early September records as of Wednesday's close, while the Dow was nearly 6% below its February high.

"I've been speaking to investors for months and all the concerns about the Green New Deal, higher taxes, expansion of the Affordable Care Act -- all of these things that you've heard -- that now dissipates," said Brian Levitt, global market strategist at Invesco. And even as votes are still being tallied, he added, "the uncertainty of the election is behind us, there is hope about medical breakthroughs and we know the [Federal Reserve] is going to be supportive."

"Markets are forecasting an improving environment," he added.

One of the big unknowns in the weeks ahead will be the size of a fiscal stimulus package -- the subject of much wrangling between both parties in Washington leading up to the election. Before Tuesday, many traders had betting on a blue wave that would have likely created an easier path for robust stimulus to aid the country's wounded economy. Now, however, it is unclear how large or broad that might be.

"What I've been asking myself in my own head -- a question to which I don't have an answer -- is whether, assuming a divided government, there is less likely to be a larger-in-size fiscal relief package because we know the two sides were quite different on the details," said Liz Ann Sonders, chief investment strategist at Charles Schwab. "What I wonder is how much of the negotiating and the digging the heels in was a function of the election...And I don't know in which direction that moves the needle."

Still, even with lack of clarity on the issue, investors piled into shares of companies across all sectors, leading all of the S&P 500's 11 groups higher -- a contrast from Wednesday, when traders unwound some of their bets on economically sensitive sectors. On Thursday, companies ranging from cruise operator Carnival to oil producer Occidental Petroleum to industrial giant Caterpillar jumped, with each rising 5% or more.

Qualcomm rallied 12% after the mobile-phone chip-making giant said it expects a surge in smartphone sales next year, thanks to growing consumer appetite for 5G-capable devices.

And megacap technology stocks also led the market higher, with Apple rising 3.4% and Amazon.com jumping 3%. While both Democrats and Republicans have ramped up scrutiny of big technology giants, the parties hold differing views on the problems the companies create and disagree on how to rein them in. That could potentially make it more difficult to pass comprehensive regulations, some investors believe.

While the election remained top of mind for many investors Thursday -- especially as vote-counting continued in a handful of swing states -- traders were on the lookout for any kind of sentiment change from the Fed after officials concluded their November meeting.

Ultimately, the central bank made no changes to its commitment to provide sustained stimulus and said the coronavirus pandemic continues to pose significant risks for the U.S. economy. On Wednesday, the U.S. reported more than 100,000 new coronavirus cases in a single day for the first time.

Meanwhile, new applications for unemployment benefits held largely steady in the week ending Oct. 31, the Labor Department said Thursday. About 751,000 Americans applied for unemployment benefits, the data showed, a level slightly lower from the week before but still considerably higher than before the pandemic.

In bond markets, the yield on the 10-year Treasury note jumped higher to 0.775%, up from 0.768% the day before, after falling earlier in the day.

Overseas, optimism was also high in the equity markets. The pan-continental Stoxx Europe 600 rose 1%.

And in Asia, Hong Kong led regional gains. The Hang Seng Index advanced 3.3%. South Korea's Kospi Composite gained 2.4%, while China's Shanghai Composite traded 1.3% higher.

Chinese technology companies could benefit from a less antagonistic relationship between the leaders of the U.S. and China if Mr. Biden wins the presidency. The Trump administration has moved to curb Americans' use of Tencent's WeChat messaging app, placed export controls on China's largest chip maker, and reduced telecommunications-equipment giant Huawei Technologies' access to foreign-made semiconductors.

"Markets are now pricing in a Biden win that would likely lead to reduced sanction pressure on Chinese companies," said Steven Leung, an executive director in Hong Kong for investment bank UOB Kay Hian. "The dust has largely settled. That's good for Chinese tech stocks," he said.

--Joanne Chiu contributed to this article.

Write to Caitlin McCabe at [e-mail] and Caitlin Ostroff at [e-mail]

(END) Dow Jones Newswires

11-05-20 1544ET