US stocks surge to record highs as Trump returns

New York — US stocks soared to record highs on Wednesday after Republican Donald Trump won the 2024 US presidential election in a stunning comeback four years after he was voted out of the White House.

The Dow Jones industrial average, S&P 500 and Nasdaq Composite all hit record highs with investors expecting lower taxes, deregulation and a US president who is not shy to weigh in on everything from the stock market to the dollar, although fresh tariffs could bring challenges in the form of a higher deficit and inflation.

The Republican’s win powered a rally in so-called Trump trades, sending US Treasury yields sharply higher. Bitcoin hit a record high of over $75,000 and the dollar was on track for its biggest one-day percentage gain since September 2022.

Polls indicated a very tight race, with some concern the process could be drawn out before a victor was declared.

“The fact that we got a clean result, there's not going to be any messy contesting or court cases or whatever it might have been, is a relief to markets,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky.

“So that’s kind of like supercharging the classic Trump trade that we saw in 2016 as well.”

The Dow rose 1,450.11 points, or 3.43%, to 43,671.12, the S&P 500 advanced 138.27 points, or 2.39%, to 5,920.87 and the Nasdaq Composite gained 514.26 points, or 2.78%, at 18,953.43 ahead of the close.

Both the Dow and S&P 500 were on track for their biggest one-day percentage gains since November 2022, with the Nasdaq poised for its biggest daily climb since August.

Financials, up nearly 6%, were the best performing of the 11 major S&P 500 sectors. Banks, expected to benefit from loosening regulations under Trump, powered the gains, with the S&P 500 bank index up about 10%, its biggest daily jump in two years.

The small-cap Russell 2000 rallied more than 5% to a three-year high, with the domestically concentrated stocks seen as likely to benefit from easier regulations, lower taxes and less exposure to import tariffs. However, rising Treasury yields could hurt smaller companies, which tend to rely heavily on borrowing and are more sensitive to higher interest rates.

The CBOE Volatility Index, also known as Wall Street's “Fear Gauge”, dropped more than 4 points to 16.37 after touching a six-week low of 15.44.

The rate-sensitive real estate and utilities sectors were among the day's few decliners as investors assessed the chances of Trump's policies boosting inflation and altering the Federal Reserve's path of interest rates, which has been a key component of Wall Street's recent rally.

The central bank is widely expected to ease the benchmark interest rate by 25 basis points at its policy-setting meeting ending on Thursday. However, traders have begun to trim bets for a cut in December and the number of reductions expected next year, according to CME’s FedWatch Tool.

Stocks viewed as likely to perform well under a second Trump term also advanced, with Trump Media & Technology Group up about 3% while Tesla leapt about 14% as CEO Elon Musk has supported Trump in his electoral campaign.

Strong gains were also made by shares of cryptocurrency companies, energy firms and prison operators, while renewable energy shares fell.

Markets were also eyeing whether the Republican Party could maintain a majority in the House of Representatives after gaining control of the US Senate, which would lead to less opposition to a Trump agenda.

Reuters