Wall Street shrugs off election limbo, rallies

Technology and health care companies led a stock market rally as Wall Street embraced the upside of gridlock.

Technology and health care companies led a stock market rally Wednesday, as Wall Street embraced the upside of more gridlock in Washington even as the outcome of the U.S. presidential election remained in limbo.

The S&P 500 rose 2.2% for its best day in five months. The benchmark index had been up 3.5% before the market lost some of its momentum toward the end of the day. That pullback wiped out more than 450 points from the Dow Jones Industrial Average, though the blue-chip index still closed more than 360 points higher.

The Nasdaq was the standout, notching its biggest gain in more than six months as traders doubled down on technology stocks.

Health insurers were big winners, too, as prospects for an overhaul of the industry dimmed.

Analysts said the gains came as markets focused on the benefits of the country’s political control remaining split between Democrats and Republicans. With Republicans edging closer to retaining control of the Senate, prospects dimmed for the tax increases and tighter regulations on businesses that investors expected if Democrats scored an electoral sweep, although a big stimulus effort for the economy that some on Wall Street say is needed now seems unlikely as well.

“The first information that people are digesting is that a split government is OK, and we can deal with this,” said Melda Mergen, deputy global head of equities at Columbia Threadneedle.

She cautioned, though, that the initial moves for the market may not last. “It’s a very quick reaction without knowing the final results,” she said. “It’s emotional rather than rational.”

The S&P 500 rose 74.42 points to 3,443.44. The Dow added 367.63 points, or 1.3%, to 27,847.66. The Nasdaq gained 430.21 points, or 3.9%, to 11,590.78.

Much of Wednesday’s strength for Wall Street was due to big gains for technology stocks. Investors have increasingly seen these stocks as some of the safer bets in the market, able to grow their profits even in a pandemic as more of daily life shifts online.

They don’t need a big stimulus effort for the economy as much as other companies, and the likelihood of Washington approving such a package dropped with the chances of a Democratic sweep. That led to the much better performance for the tech-heavy Nasdaq over other indexes. Microsoft rose 4.8%, Amazon climbed 6.3%, Facebook surged 8.3%, and Google’s parent company gained 6.1%.

Cigna, United-Health Group and Anthem were among the biggest gainers in the S&P 500, as investors bid up health care stocks.

Other areas of the stock market, where profits are more dependent on the strength of the economy, lagged behind. Financial stocks in the S&P 500 dropped 1.3%. Companies that make construction materials and could have benefited from a big infrastructure plan under a Democratic sweep also fell.

Some of the market’s sharpest moves overnight were in yields for U.S. government bonds, which had earlier risen on growing expectations for economic stimulus.

The 10-year Treasury yield swung from 0.88% late Tuesday up to 0.94% as polls were closing.

It then sank as low as 0.75% after Trump made premature claims of victories in several key states, Republicans held onto Senate seats and a couple economic reports came in weaker than expected. It slipped to 0.76% in late-afternoon trading.

Uber soared 14.6% and Lyft jumped 11.3% after the ride-hailing companies won a vote in California allowing them to continue classifying their drivers as contractors instead of employees and preserve their business models.

The Fed will announce its latest decision on interest-rate policy on Thursday. Its moves earlier this year to slash interest rates to record lows and prop up bond markets have helped Wall Street soar since March.