Wall St gains as investors reassess presidential race after Biden exit
Wall Street’s Major Indexes Rise as Investors Reassess Presidential Race Following Biden’s Announcement
On Monday, Wall Street’s three main benchmarks rose as investors reexamined the presidential race after U.S. President Joe Biden announced he would not seek a second term.
This upward movement helped both the S&P 500 and the Nasdaq Composite recover some of the losses from the previous week, which had seen their worst weekly performance since April due to the sell-off of megacap growth stocks and a global tech outage.
The Dow Jones Industrial Average also returned to positive territory, poised to break a two-session losing streak since hitting an all-time closing high last Wednesday.
On Sunday, Biden announced his withdrawal from the race and endorsed Vice President Kamala Harris for the November election. Online betting site PredictIt showed a decrease in pricing for a Donald Trump victory by 4 cents to 60 cents, while the odds for a Harris win rose by 12 cents to 39 cents.
Among the gainers on Monday were the megacap stocks that had been heavily impacted during the previous week’s declines. Alphabet (NASDAQ), Meta Platforms (NASDAQ), and Tesla (NASDAQ) saw increases ranging from 2.4% to 5.2%.
Nvidia (NASDAQ) also rose 4.3% after Reuters reported that the AI chip leader was developing a version of its new flagship AI chips for the Chinese market that would comply with current U.S. export controls.
The Information Technology index led sectoral gainers and was on track to end a four-day losing streak.
As of 1:57 p.m. ET, the S&P 500 was up by 56.49 points, or 1.03%, to 5,561.49 points, while the Nasdaq Composite gained 271.12 points, or 1.53%, reaching 17,998.06. The Dow Jones Industrial Average increased by 102.18 points, or 0.25%, to 40,389.71.
Trump-linked stocks showed mixed results, with Trump Media & Technology Group dropping 1.4% while software company Phunware gained 2.2%.
Biden’s decision not to run could lead investors to unwind trades based on bets that a Trump victory would increase U.S. fiscal and inflationary pressures. However, some analysts suggested that the markets could benefit from an increased likelihood of a divided government under the next administration.
“Trump still has the lead, but everybody is also waiting to see who Harris will select for her running mate, which adds uncertainty, but also a little bit of excitement to the campaign,” said Sam Stovall, chief investment strategist at CFRA Research.
The question of who will join the Democratic presidential ticket adds to investor uncertainty ahead of quarterly earnings reports from two of the so-called Magnificent Seven companies, Alphabet and Tesla.
These results will test whether the recent rally in top-tier high-momentum stocks is sustainable and if there will be a continued shift to underperforming sectors. The small-cap Russell 2000 index gained 0.9%.
“There is an awful lot of underperformance in the small-cap stocks that investors can take advantage of. … They are very inexpensive by historic measures,” Stovall noted.
Important economic data, including the Personal Consumption Expenditures Price Index—considered the Federal Reserve’s preferred inflation gauge and expected to shed light on the monetary policy outlook—will be released throughout the week.
Traders have broadly priced in a 25-basis-point rate cut by September and two cuts by the year’s end, according to LSEG and CME’s FedWatch data.
Cybersecurity firm CrowdStrike (NASDAQ) slumped 12.8%, continuing losses after a software update from the company caused Friday’s global tech outage.
Delta Air Lines (NYSE) fell 2% after canceling over 600 flights as it struggled to restore operations following the outage.
Verizon Communications (NYSE) dropped 6.2% after missing second-quarter revenue expectations.
Mattel Inc. (NASDAQ) jumped 16% after Reuters reported that the toy maker had received an acquisition offer from buyout firm L Catterton.
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