Stock Markets Confront an Uncertain Election Outcome

The outcome that many on Wall Street feared but expected emerged on Wednesday, as Election Day failed to produce a clear victor in the U.S. presidential race, leaving investors to wait and watch.

Stock futures swung up and down throughout the night and into early Wednesday. Trading in futures contracts for the S&P 500 moved between gains and losses nearly 10 times in the 12 hours leading to 6 a.m. Eastern on Wednesday.

The biggest market moves came around 2 a.m. Eastern after President Trump said that he had won re-election against Joseph R. Biden Jr. despite the fact that several battleground states had not announced results, and that he would ask the Supreme Court to intervene in the race.

The S&P 500 futures, which tumbled after Mr. Trump’s remarks, recovered their ground and pointed to a gain of about 1.5 percent in the S&P 500 when trading begins, and the Dow Jones industrial average was also poised for a gain. The Nasdaq 100, which puts a heavy emphasis on technology stocks, surged in premarket trading.

European markets opened about 1 percent lower and then reversed their losses as traders set in for what could be a long wait for results.

Susannah Streeter, an analyst at Hargreaves Lansdown, said investors were adopting a wait-and-see approach but that Mr. Trump’s comments were a reminder that it could be a volatile trading session. Earlier, Asian markets finished mixed after a turbulent ride.

One of the biggest moves was in yields for U.S. Treasury bonds, an indicator of investor nervousness. Yields fell as prices rose, indicating a greater desire to park money in a safe place.

Investors saw a clearer path on Tuesday, when they priced in a relatively quick victory for Mr. Biden. A strong victory for him and the Democratic Party could set the stage for a large pandemic relief spending package in Washington early next year. That could bolster the economy, fueling consumer spending and cushioning growth even as coronavirus cases surge again. It would also mean big deficits in the near term, potentially pushing longer-term interest rates higher.

Wall Street has been clamoring for such an aid program for months, but negotiations between the White House and the Democratic leadership in the House of Representatives fizzled out in recent weeks.

“Generally speaking, markets have performed best under divided government — when one party has only partial control of the House, Senate and presidency,” Mona Mahajan, a strategist at Allianz Global Investors, wrote in a note. “Although in this environment enacting a swift stimulus response would be a key priority.”

Financial markets were whipsawed overnight as traders and pundits saw early returns pointing to a close result, raising the possibility that President Trump could be re-elected, and the Senate remain in Republican control. On one hand, Mr. Trump’s low taxes and limited regulation have been popular among investors. On the other, analysts have been clear that a divided government could hurt the chances for a big spending package. Investors might also be wary that delayed vote counts could lead to a long period of uncertainty.

Instead, Wall Street woke up to the prospect of an election with no result, with Mr. Biden favored to prevail in the presidential contest but the Republicans in good shape to keep hold of the Senate. But neither of those outcomes was certain.

A drawn-out count that gets contested in courts is the nightmare scenario for market watchers.

“At this point, we’ve got a couple days’ good grace with the market — but we need a winner fairly soon or it’s going to upset the apple cart,” said Ryan Detrick, the chief market strategist at LPL Financial.

  • U.S. stock futures fluctuated early on Wednesday. S&P 500 futures, which swung between gains and losses about 10 times over 12 hours, were poised to rise 1.5 percent when trading starts.

  • Futures for the Nasdaq composite index, heavily weighted toward technology stocks, surged more than 2 percent.

  • European markets were mostly higher, with the Stoxx Europe 600 index gaining 0.5 percent. In Britain, the FTSE 100 index was 0.3 percent higher, the CAC index in France climbed 0.4 percent and in the DAX index in Germany was less than 0.1 percent stronger.

  • In Asia, stocks closed higher, with the Shanghai Composite in China gaining 0.2 percent, and the Nikkei in Japan rising 1.7 percent.

  • The biggest market reaction to the presidential election has been in U.S. Treasuries. The 10-year yield on American government bonds plummeted 10 basis points, or 0.1 percentage points, to 0.79 percent. It was the biggest single-day move in seven months, and a sign that investors were seeking a safe asset.

  • Oil prices also climbed. West Texas Intermediate, the U.S. benchmark, gained 2.7 percent, at $38.68 a barrel.

  • Gold slumped 0.7 percent to $1,897 per ounce.

  • An index of the U.S. dollar against other major currencies was flat, after being stronger for most of the morning in Europe.

Oil prices rose Wednesday as the results of the U.S. presidential election remained uncertain. Brent crude, the international benchmark, gained about 2.5 percent, while West Texas Intermediate, the American standard, was up about 2.7 percent.

“The election’s outcome is not really priced in this morning,” Bjornar Tonhaugen, head of oil markets at Rystad Energy, a consulting firm, wrote in a note on Wednesday. But, he added, traders will be keeping an eye “locked on TV screens.”

Oil prices, which had risen as much as 2 percent earlier in the evening, slumped after President Trump said that he had won the election, despite the fact that several battleground states have not yet reported results. The prices quickly recovered.

With no clear outcome in the United States, traders are reacting to other news, including industry data published Tuesday showing a sharp fall in stockpiles of crude oil in the United States. This drop may indicate that economic recovery from the pandemic in the country, the world’s largest oil consumer, may be stronger than expected. Concerns had been growing that new lockdowns in countries like Britain, France and Germany might curb oil consumption.

In addition, hopes are increasing that OPEC and Russia may agree to curb output further or at least defer increases that are planned from the beginning of next year.

Over the longer term, analysts say, a victory for Joseph R. Biden Jr. might have negative implications for oil prices. Mr. Biden, for instance, has said he would push for a transition away from oil to greener forms of energy, leading to reduced consumption of fossil fuels. He might also try to revive the nuclear deal with Iran that the Trump administration torpedoed, eventually bringing a flood of Iranian crude back on the market.

Mr. Trump on the other hand has been a strong advocate for the oil industry in the United States, pushing for deregulation and looser environmental standards. Earlier this year, he leaned on OPEC and Russia to trim production to bolster prices in the United States.

Credit…Chang W. Lee/The New York Times

On Election Day, stocks surged as traders and investors anticipated a “blue wave” with Joseph R. Biden Jr. defeating President Trump and the Democrats gaining both houses of Congress. Stocks rose and U.S. Treasuries fell as traders ditched the traditionally safe asset.

Early Wednesday morning, markets flipped.

Stock futures fluctuated substantially as the reality set in that it could take days to get a clear result, while Mr. Trump tried to claim victory before all the votes were counted. But analysts were also watching Senate races, which no longer clearly indicated a Democratic majority. At 5:30 a.m. Eastern, Democrats and Republicans each had 47 seats.

See the full Senate results here, and updates on the tight North Carolina race here.

Here’s what analysts had to say:

There is confusion about what exactly Mr. Tump meant when he said votes should stop being counted, said Jane Foley, a strategist at Rabobank. But “there is some certainty,” she said. “The optimism about a blue wave was premature.”

“For the market, there is both good and bad news associated with the idea that Biden won’t have the blue wave through Congress,” Ms. Foley said. “On the one hand, there is disappointment that there isn’t going to be an end to this bickering between the House and the Senate in the near term,” which diminishes hopes of a large stimulus package. But on the other hand, it will be harder for Democrats to increase taxes.

“We expect market volatility to remain elevated until the result becomes clear,” Karen Ward, a strategist at J.P. Morgan Asset Management, wrote in a note to clients. “When it comes, the outcome will be primarily interpreted through the lens of the prospects for further fiscal stimulus. Politics are important, but other factors, most notably progress toward a medical solution for Covid-19, will also be key.”

“Markets, which had begun to factor in a Democrat sweep and a significant stimulus bill, are now reining in their growth expectations,” Keith Wade, an economist at Schroders, a London-based asset manager, wrote in a note to clients. “Estimates had suggested this could have been worth an extra 1 percentage point of growth in the U.S. next year.”

“There is no result yet, and the chances of the ‘blue sweep’ expected by markets, is much smaller now,” Kit Juckes, a strategist at Société Générale, wrote in a note to clients. “That definitely means short-term uncertainty, until we get a result. It probably means less fiscal easing than would otherwise have been the case, and continued dependence on the Fed to prop up the economy, for longer.”

“It could take even longer to know who won key congressional races, which so far suggest the Democrats and Republicans may be heading for a tied Senate,” Mona Mahajan, a strategist at Allianz Global Investors, wrote in a note. “Generally speaking, markets have performed best under divided government — when one party has only partial control of the House, Senate and presidency, although in this environment enacting a swift stimulus response would be a key priority. Until the final outcome is known, we expect some flight-to-safety response, which will likely favor perceived safe havens, such as government bonds, the U.S. dollar and gold.”

Credit…Jim Wilson/The New York Times

California voters on Tuesday approved Proposition 22, a ballot measure that allows gig economy companies like Uber and Lyft to continue treating drivers as independent contractors.

The vote opens a path for the companies to remake labor laws throughout the country.

Uber, Lyft and the delivery service DoorDash designed the measure to exempt the companies from a state labor law that would have forced them to employ drivers and pay for health care, unemployment insurance and other benefits. As a concession to labor advocates, the initiative offers a wage floor and limited benefits to drivers.

The Associated Press projected early Wednesday that Prop. 22 had carried 58 percent of the vote. Proposition 22 faced the strongest opposition in San Francisco, where Uber and Lyft are headquartered, with more than a 19-point deficit. The fight pit labor groups and state lawmakers against ride-hailing and delivery start-ups that spent $200 million in support of the measure.

With the gig work model cemented in California, Uber and other gig economy companies are expected to pursue federal legislation that would protect them from similar employment laws in other states.

“The last 14 months in California have been the most critical point on this issue,” said Bradley Tusk, a venture capitalist who advised Uber on political issues during its early years.

Still, their victory comes as federal lawmakers and officials are increasingly eager to take on big tech. Members of Congress in both parties support cracking down on social media companies and reining in the likes of Amazon and Google. Uber and its gig economy peers could be caught in that anti-tech sentiment.

Share prices in Uber and Lyft jumped in premarket trading on Wednesday after California voters approved a measure that will allow the ride-hailing companies to continue treating drivers as independent contractors.

Uber shares gained as much as 16 percent, and Lyft rose 18 percent.

Both companies help draft the ballot measure, known as Proposition 22, which exempts them from a new state labor law that would have forced them to employ drivers and pay for health care. Uber is expected to pursue federal legislation that would protect it and other gig economy companies from similar employment laws in other states.

The battle over Prop. 22 became hugely expensive, with backers contributing $200 million to a campaign that pitted Uber, Lyft, DoorDash and similar gig economy companies against labor groups and state lawmakers.

Credit…Joe Raedle/Getty Images

Voters in Florida on Tuesday approved a ballot measure that would raise the state’s minimum wage to $15 by 2026.

Florida becomes the eighth state in the country to enact a minimum wage of $15, according to the National Conference of State Legislatures, but the first of them that Donald Trump carried in the 2016 presidential election. The District of Columbia has also enacted a $15 minimum wage.

Florida’s measure, known as Amendment 2, earned a place on Tuesday’s ballot in December and needed at least 60 percent of the vote to pass. With 99 percent of the vote counted, the measure had slightly more than 61 percent.

Under the measure, the state minimum wage would rise from its current hourly rate of $8.56 to $10 in September, and then increase by $1 every September through 2026. After that, annual increases would be tied to inflation.

A study by the Florida Policy Institute, a think tank backing the increase, found that the higher wage would directly benefit 2.5 million workers in the state.

A number of studies have found that moderate increases in the minimum wage have not led to significant job losses. But economists caution that the effects on employment depend on the size of the increase relative to a city or state’s wage scale.

That could make a $15 minimum wage more costly in a state like Florida, where wages tend to be substantially lower than wages in other states that have enacted a $15 minimum wage.

Credit…Joshua Roberts/Reuters

Sandwiched between Tuesday’s election and the Friday’s October jobs report, the Federal Reserve is set to announce its November policy decision.

There’s a good chance that the central bank will lay low at Thursday’s meeting, both because of the murky economic outlook and because the Fed is politically independent and will want to avoid inserting itself into the election storyline.

“I don’t think they want to get into anything political — anywhere near anything political,” said Gregory Daco, chief U.S. economist at Oxford Economics. Though Chair Jerome H. Powell is sure to face election-related queries at his webcast news conference, he is likely to dodge them.

“I’m sure he’s preparing in front of a mirror right now to answer some of these questions,” Mr. Daco said.

The Fed slashed interest rates to near-zero in March and has been buying about $120 billion in government-backed bonds per month to soothe markets and support demand. Officials are expected to discuss their future bond buying plans at this meeting, but economists expect them to hold off on major decisions as the economy’s path ahead remains wildly unsettled.

Manufacturing data have shown recent improvement. Spending on goods has been strong, bolstered by savings stashed away earlier in the year even as expanded unemployment benefits have lapsed and small business loans have run dry. Yet the situation could darken as consumers exhaust their savings and coronavirus cases surge, and the pace of job gains is already slowing.

Economists in a Bloomberg survey estimate that employers probably brought back or added 600,000 workers in October, a relatively small number when compared to the millions of Americans still out of work.

Fed officials have historically received key jobs numbers from the White House Council of Economic Advisers ahead of their release on Friday morning. But the secure fax containing that data has typically been sent late on Thursday afternoon, a person familiar with the process said. Officials will not know the October numbers before their meeting.

No matter who is elected, the next president will face an economy that is still reeling after the shutdowns last spring. Some areas have bounced back, but others remain deeply depressed, and millions of Americans are still out of work.


Share of adults ages 25 to 54 who were working in September. That’s up from 69.7 percent in April, a 45-year low, but it’s still about as bad as in the worst of the Great Recession.

2.4 million

Number of Americans in September who had been unemployed for more than six months — what’s considered to be long-term unemployment.


Number of Hispanic women who have left the labor force since February. Service-sector job losses and school closures have been especially hard on Black and Hispanic women.


Change in gross domestic product from the end of 2019. G.D.P. rebounded from its spring plunge, but remains well below its prepandemic level.


Growth in consumer spending on goods from January to September. With nowhere to go during the pandemic, Americans are buying more stuff than ever.


Decline in consumer spending on services from January to September. Hotels, restaurants and movie theaters have reopened around the country, but sales are nowhere close to normal.

6.5 million

Annual rate of sales of existing homes in September, up 21 percent from a year earlier. The housing market has been fueled by ultra-low interest rates and city dwellers seeking more space.


Change in manufacturing output since January. U.S. factories weren’t hit as hard by the crisis as many other sectors, but like the rest of the economy they have seen progress stall in recent months.

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