The major U.S. index futures are currently pointing to a sharply higher open on Wednesday, with stocks likely to extend the rally seen in the previous session.
The substantial upward momentum on Wall Street comes as former President Donald Trump has been declared the winner in the presidential election versus Vice President Kamala Harris.
Claiming victory in several key swing states, Trump is projected to win far more than the 270 Electoral College votes needed to secure his return to the White House.
Trump is seen by the markets as better for corporations and is likely to renew the tax cut package enacted during his first term, which was due to expire at the end of 2025.
A Trump administration is also expected to scale back government regulations and be less hostile to mergers and acquisitions.
However, Trump has also called for increased tariffs on China and other countries, which could lead to renewed inflation concerns.
“A side effect of tariffs and higher prices would be interest rates staying higher for longer, which would be unhelpful for the housing market which, in turn, will act as a drag on home-related categories,” said Neil Saunders, Managing Director of GlobalData.
He added, “While Trump promised lower interest rates, and wants more control over the setting of rates, it is not in his immediate gift to enact this kind of change.”
Republicans are also projected to retake control of the Senate for the first time in four years, although control of the House remains up for grabs.
With the elections now largely in the rearview mirror, traders will turn their attention to the Federal Reserve, which is due to announce its latest monetary policy decision on Thursday.
The Fed is widely expected to lower interest rates by 25 basis points, but the accompanying statement could the impact the outlook for future rate cuts.
Stocks showed a lack of direction over the course of Monday’s session before closing moderately lower but showed a strong move back to the upside during trading on Tuesday. The tech-heavy Nasdaq helped lead the way higher.
The major averages ended the day off their highs of the session but still firmly positive. The Nasdaq surged 259.19 points or 1.4 percent to 18,439.17, the S&P 500 shot up 70.07 points or 1.2 percent to 5,782.76 and the Dow jumped 427.28 points or 1.0 percent to 42,221.88.
The rally on Wall Street may partly have reflected optimism the stock market and the U.S. economy in general will continue to perform well regardless of the results of the elections.
Adding to the positive sentiment about the economy, a report from the Institute for Supply Management showed service sector activity unexpectedly grew at an accelerated rate in the month of October.
The ISM said its services PMI rose to 56.0 in October from 54.9 in September, with a reading above 50 indicating growth. The uptick surprised economists, who had expected the index to dip to 53.8.
With the unexpected increase, the ISM’s services PMI reached its highest level since hitting 56.4 in July 2022.
A separate report released by the Commerce Department showed a significant increase in the size of the U.S. trade deficit in the month of September, as imports surged and exports slumped.
Airline stocks showed a substantial move to the upside on the day, with the NYSE Arca Airline Index soaring by 2.8 percent.
Considerable strength was also visible among housing stocks, as reflected by the 2.3 percent surge by the Philadelphia Housing Sector Index.
Biotechnology stocks also saw considerable strength, driving the NYSE Arca Biotechnology Index up by 1.6 percent to its best closing level in well over three years.
Brokerage, computer hardware and semiconductor stocks also showed significant moves to the upside, moving higher along with most of the other major sectors.