It's said that markets hate uncertainty. That was certainly the case when stocks staged a torrid rally on the outcome of the U.S. presidential election. The so-called Trump trade was in full force, with some names benefitting more than others.
Risk appetite returned with gluttonous abandon on Wednesday, as the tech-heavy Nasdaq Composite added 3% to 18,983 and the small-cap Russell 2000 popped nearly 6%. The blue chip Dow Jones Industrial Average rallied 3.6%, or 1,508 points to 43,729, while the broader S&P 500 rose 2.5% to 5,929.
Financial stocks were the day's biggest winners at the sector level, followed by energy and industrials. Of the S&P 500's 11 sectors, only real estate, consumer staples and utilities finished in the red.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Outside of equities, benchmark 10-year Treasury notes sold off, raising borrowing costs at the longer end of the yield curve. Gold and oil declined.
The CBOE Volatility Index (VIX) – also known as the investor fear gauge – plummeted by about a fifth.
"Election results are sending stocks to the moon as investors celebrate GOP control of the White House and Senate," writes José Torres, senior economist at Interactive Brokers. "A red sweep has likely arrived in Washington, with market participants enthusiastic that a lighter regulatory regime, lower tax rates, a business-friendly environment and 'Made in America' policies will drive sales and profitability."
Stocks in focus
Financials were the biggest winners on Wednesday. Goldman Sachs (GS) was the Dow's best performer, gaining 13.1%. JPMorgan Chase (JPM) rose 11.6%, while American Express (AXP) – one of Warren Buffett's top stocks – was up 7%.
Meanwhile, the S&P 500 was led by financial names such as Discover Financial Services (DFS, +20.1%) and Synchrony Financial (SYF, +18.8%). American steel producer Nucor (NUE, +16%) – one of the best stocks for reliable dividend growth – also topped the S&P 500 charts.
Outside of the main equity benchmarks, Trump Media & Technology Group (DJT, +5.8%) enjoyed more modest upside during the session.
Meanwhile, the Nasdaq-100 – an index of the largest non-financial companies in the Nasdaq Composite – saw strong performance from industrial stocks – but one sector name in particular stood out.
Tesla stock soars
Tesla (TSLA) stock rallied 14.8% on Wednesday for obvious reasons. "TSLA is sharply higher because of Elon Musk’s coziness with the President-elect," writes Interactive Brokers Chief Strategist Steve Sosnick.
The electric vehicle (EV) maker gained nearly $120 billion in market cap, or more than the entire market value of Nike (NKE), a Buy-rated Dow Jones stock. While some of Trump's proposed trade policies could be a headwind for the wider industry, Tesla should benefit, bulls contend.
"We believe a Trump presidency would be an overall negative for the EV industry as likely the EV rebates/tax incentives get pulled," writes Wedbush Securities analyst Daniel Ives, who rates shares at Outperform (Buy). "However, for Tesla we see this as a potential positive with some caveats. Tesla has the scale and scope that is unmatched in the EV industry and this dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment."
Be that as it may, whether Tesla stock is a buy at current levels is a matter of debate among the wider community of industry analysts.
Fed meeting on tap
Markets were so busy digesting the outcome of the election they were unable to mount the usual anxiety that precedes meetings of the Federal Open Market Committee (FOMC). Indeed, the next Fed meeting wraps up tomorrow with an afternoon policy announcement and press conference with Fed Chair Jerome Powell.
Market participants are highly confident the Fed will deliver another quarter-point cut to the short-term federal funds rate. However, as always, the real action will take place during Powell's post-statement presser.
As of November 6, futures traders assigned a 98% probability to the FOMC cutting rates by 25 basis points (bps), or 0.25%, according to CME Group's FedWatch Tool.
Related content
- Market Reaction to Election Results: What the Experts Are Saying
- Best Dividend Stocks to Buy for Dependable Dividend Growth
- Nvidia Stock Is Joining the Dow. Is It Time to Buy?
-
April RMD? Five Tax Strategies to Manage Your 2025 IncomeTaxable Income The April 1, 2025, deadline for required minimum distributions (RMDs) is fast approaching for retirees who turned 73 in 2024.
-
Rising AI Demand Stokes Undersea InvestmentsThe Kiplinger Letter As demand soars for AI, there’s a need to transport huge amounts of data across oceans. Tech giants have big plans for new submarine cables, including the longest ever.
-
How Much Does Being Rich Matter in Retirement?After a certain point, having more money in retirement won't make you any happier, new research shows. Instead, physical health, a sense of purpose, and a minimal amount of non-mortgage debt are more relevant.
-
The Three Biggest Fears Keeping Retirees Up at NightHere are the steps you can take to put those fears to rest and retire with confidence so you can relax and enjoy the life you've planned.
-
What Can a Donor-Advised Fund Do for You? (A Lot)DAFs and private foundations go about helping charities (and those who donate) in different ways. Each comes with its own benefits and restrictions to navigate.
-
Estate Planning When You Have International AssetsEstate planning gets tricky when you have assets and/or beneficiaries outside the U.S. To avoid costly inheritance mistakes, it pays to understand the basics.
-
Microsoft Stock: Innovation Spurs Its 100,000% ReturnMicrosoft's ability to recognize the "next big thing" has allowed sales – and its share price – to grow exponentially over the years.
-
Three Essential Estate Planning Steps to Protect Your Nest EggAfter dedicating years to building your wealth and securing your future, make sure your assets are protected and your loved ones are provided for in the future.
-
Is Chasing the American Dream Ruining Your Financial Life?Too many people focus on visible affluence as a marker of success. Here's how to avoid succumbing to the pressure and driving yourself into debt.
-
Stock Market Today: Dow Sinks 715 Points as Inflation Unrest GrowsInflation worries are showing up in both hard and soft data.
