As Trump Supporters Storm Capitol, Dow Rallies 400 Points To Close At All-Time High

Topline

Chaos in Washington, D.C. sparked by President Donald Trump and his supporters tapered a massive Wednesday stock-market rally but didn’t stop the Dow Jones Industrial Average from closing at an all-time high as investors look toward ramped-up stimulus spending now that Democrats look poised to take control of the Senate.

Key Facts

The Dow surged 410 points, or 1.4%, tacking on to a record close just one day earlier, while the S&P 500 ticked up 0.6%; the tech-heavy Nasdaq, meanwhile, sank 0.6%, largely on concerns that a Democrat-controlled government could spur heightened regulation for big tech firms–along with higher corporate taxes.

Facebook, Netflix and Apple each ended the day down about 3%, while Amazon and Microsoft shed about 2% and 1%, respectively.

Heading up losses in the S&P, chipmaker Nvidia plummeted 6%, and software companies ServiceNow, Adobe and Synopsys all dropped about 4%.

The Dow was rallying more than 600 points until around 2:15 p.m. EST, when pro-Trump protests in Washington led to the president’s supporters storming the Capitol, where lawmakers were working to certify results of the presidential election, and causing multiple injuries.

Meanwhile, shares of clean energy providers, who experts believe could boom under a Democrat-controlled government, headed up market gains, with First Solar, Enphase Energy and SolarEdge Technologies climbing 8%, 11% and 9% respectively. 

That rally extended to electric-vehicle makers: Tesla and GM climbed about 2% Wednesday.

Meanwhile, building-material company Martin Marietta and construction firm Vulcan Materials shot up 7% and 6%, reflective of expected spending under infrastructure plans long touted by the incoming administration.

Crucial Quote 

“The Georgia Senate races shocked America as Democrats appear to have won both races, seemingly paving the way for President-elect Biden to push forward his agenda. Wall Street is pricing more stimulus checks, aid for state and local governments and more fiscal support once Covid lockdown efforts are intensified,” Oanda senior market strategist Edward Moya said Wednesday. “Everything was going as planned in Washington until protests erupted after President Trump told a cheering crowd, ‘We will never concede,’ and U.S. stocks pared gains as Trump protesters seek to overthrow the presidential election results.”

Surprising Fact

The Russell 2000, a measure of small-cap stock performance, also hit a record high, surging 4% Wednesday amid expectations that increased stimulus measures under Democrats could benefit small businesses.

Chief Critic

“I don’t expect major stock market implications surrounding a 50-50 tie in the Senate,” says David Bahnsen, the chief investment officer of $2.5 billion advisory The Bahnsen Group. “While the Vice President’s vote means that a straight-party line vote would belong to the Democrats, some of the market unfriendly policies that investors have been worried about in the event of a blue wave are still not going to come so easily,” he adds, pointing to three moderate Democratic Senators and a similarly razor-thin lead for Democrats in the House.

Tangent

Shares of gambling firms DraftKings and Penn National Gaming climbed 3% each after New York Gov. Andrew Cuomo signaled he was open to allowing online sports betting in the state, touting an opportunity to become “the largest sports wagering market in the United States.”

Key Background

The blue wave Wall Street experts predicted for months didn’t materialize on Election Day, and stocks rallied in the weeks since after a split Congress seemed virtually guaranteed (thereby lowering the risk of tax hikes and regulation), but investors have second-guessed that outcome this week as polls increasingly moved in Democrats’ favor, resulting in a modest sell-off Monday that recouped some losses Tuesday. “The prospects for aggressive stimulus and bold fiscal initiatives greatly increase” if Democrats flip the Senate, StoneX Macro Strategist Vincent Deluard said in a recent note, particularly with regards to student loan forgiveness, sweeping climate legislation (dubbed a “Green New Deal”) and heightened relief for state and local governments (a Democratic sticking point in stimulus negotiations that lost its legs in the current bill). Therefore, policy under a Biden administration and Democrat-controlled Congress is expected to hurt industries like big pharma and private insurers, but benefit homebuilders and clean-energy providers.

What We Don’t Know

The race between Democrat Jon Ossoff and Republican incumbent David Perdue has yet to be called, but officials expect that could change as early as Wednesday evening.

Further Reading

We Looked At How The Stock Market Might Perform If Democrats Sweep Georgia – And The Results Aren’t What You Think (Forbes)

Betting Markets Have Georgia Senate Runoffs As Toss-Ups–Here’s What Investors Should Expect If Democrats Pull Off A Win (Forbes)

Facebook, Amazon, Apple Could Be In Big Trouble Under Biden And A Democrat-Controlled Congress—Here’s What Investors Should Expect (Forbes)

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