NEW YORK – Wall Street’s post-election bounce grew on Tuesday afternoon as U.S. stocks continued to gain ground in late afternoon trading.
The benchmark Dow Jones Industrial Average and broader S&P 500 each added about 2 percent to 26,165.88 and 2,811.01, respectively, near 2040 GMT, rallying in the wake of key midterm elections that gave Democrats control of the lower house of Congress.
The tech-heavy Nasdaq had gained 2.5 percent, rising to 7,557.46.
With a handful of races still too close to call, Democrats were on track to capture 30 or more House seats, taking control and providing a check on Trump’s policies.
But Republicans appeared likely to win three to five Senate seats and solidify their control of the upper house following Tuesday’s vote.
Analysts said the market’s gains reflected relief that an event viewed as a source of uncertainty had finally passed.
A Democratic sweep of Congress would have been seen as a threat to Trump’s agenda and providing momentum to calls for an impeachment investigation, while a Republican sweep would have bolstered the odds for additional tax cuts that could have worsened the U.S. fiscal outlook, analysts said.
Wells Fargo said the bipartisan Congress means the odds of “significant, market-moving legislation are minimal,” not threatening the outlook for continued solid economic growth and moderate inflation.
Torsten Slok, chief international economist at Deutsche Bank, said “gridlock” from a split Congress has “historically been bullish for equities and we expect to see the same pattern again.”
But Berenberg Capital Economics offered a gloomier warning on the potential for “even more congressional dysfunction — if that is possible” that could elevate the odds of a government shutdown.
“We expect the highly partisan and polarized next session of Congress with split powers between the two political parties to lead to significant political rancor and theatrics but little meaningful legislation,” Berenberg said.
Goldman Sachs said the election would yield no major changes on taxes or trade. Goldman said enactment of bipartisan infrastructure investment “seems unlikely,” although other analysts viewed the election outcome as beneficial to that long-stalled initiative.
Goldman said the Democratic win in the House opened the door to potential passage of legislation to limit drug prices, an objective Trump has also emphasized at times.
Still, shares of drug companies were generally higher Wednesday, suggesting investors still do not expect any legislation as significantly denting pharma profits.
Technology shares were another out-performer, with Amazon gaining 4.5 percent, Google-parent Alphabet 2.4 percent and Microsoft 3.5 percent.