The stock market’s huge rally on Wednesday lifted multiple industries after the relatively unsurprising midterm election results reassured investors. Big-name technology, consumer and healthcare companies soared as the S&P 500 index closed at its highest level in four weeks.
The S&P 500 climbed 58.44 points, or 2.1%, to 2,813.89. The index has risen six of the last seven days to recover most of the losses it suffered in October, when it fell nearly 7%.
The Dow Jones industrial average rose 545.29 points, or 2.1%, to 26,180.30. The Nasdaq composite climbed 194.79 points, or 2.6%, to 7,570.75. The Russell 2000 index of smaller-company stocks added 26.06 points, or 1.7%, to 1,582.16. Three-fourths of the stocks on the New York Stock Exchange traded higher.
“The market likes when what it expects to happen happens,” said JJ Kinahan, chief markets strategist for TD Ameritrade. “We haven't had that happen in a little while, when you think about major events like Brexit or the presidential election.”
Historically markets have performed well after midterm elections and with split control of Congress.
High-growth stocks took an especially brutal beating during the market's drop last month. Quincy Krosby, chief market strategist at Prudential Financial, said it will be worth watching to see if investors are willing to buy those stocks again or if they continue to prefer slower-growing, more “defensive” companies such as utilities and household goods makers.
On Wednesday investors bet on growth. Amazon jumped 6.9% to $1,755.49 and Microsoft gained 3.9% to $111.96, while Google's parent company, Alphabet, picked up 3.6% to $1,108.24.
Steady, defensive stocks trailed the rest of the stock market. Those companies tend to do well when stocks are in turmoil, but they're less appealing when investors are betting on economic growth.
Industrial companies made strong gains, but they didn't do as well as the rest of the market. While some investors hope that President Trump and congressional leadership will pass an infrastructure stimulus bill — both Trump and Democratic leader Rep. Nancy Pelosi (D-San Francisco) spoke about it on Wednesday — they've had those hopes dashed more than once since Trump took office.
It's not clear how the election will affect the Trump policy that Wall Street might be most concerned about: the trade dispute with China. Trump has imposed taxes of up to 25% on $250 billion of Chinese imports and threatened additional tariffs on top of those. Beijing has responded with tariffs on $110 billion of American goods.
Banks also didn't rise as much as other stocks. Republicans had discussed a new round of tax cuts if they maintained full control over Congress, which would have expanded the government's deficits further and required it to issue more debt. Government bond yields surged overnight after a batch of strong early results for some GOP candidates, but then headed lower as Democrats' fortunes improved, making a new tax cut package unlikely.
Democrats' win in the House means Republicans won't be able to take another shot at repealing the 2010 Affordable Care Act, which extended health insurance coverage to millions of Americans. Voters in Idaho and Nebraska all voted to expand Medicaid, and the winning gubernatorial candidates in Maine and Kansas also favor expanding Medicaid benefits. Voting on a Medicaid expansion proposition in Utah was too close to call.
Health insurers, hospital operators and Medicaid program operators all jumped. UnitedHealth gained 4.2% to $274.63 and hospital company HCA added 4.7% to $141.65. Molina, a provider of Medicaid-related services, surged 10.5% to $137.32.
Marijuana stocks jumped after Michigan voted to legalize recreational marijuana and Utah and Missouri voters approved medical marijuana measures. The stocks rose even further after the resignation of Atty. Gen. Jeff Sessions, who promoted more aggressive enforcement of federal laws against marijuana. Tilray vaulted 30.6% to $139.60 and Canopy Growth rose 8.2% to $46.07.
Oil prices continued to fall. U.S. crude lost 0.9% to $61.67, and Brent crude, the standard for international oil prices, dipped 0.1% to $72.07 a barrel in London.
Wholesale gasoline lost 2.8% to $1.65 a gallon and heating oil rose 2.2% to $2.24 a gallon. Natural gas was unchanged at $3.56 per 1,000 cubic feet.
Gold rose 0.2% to $1,228.70 an ounce. Silver picked up 0.5% to $14.57 an ounce. Copper added 0.8% to $2.75 a pound.
In Asia, Japan's benchmark Nikkei 225 fell 0.3% while South Korea's Kospi slipped 0.5%. But Hong Kong's Hang Seng edged 0.1% higher.
The yield on the 10-year Treasury note rose slightly, to 3.22%. It spiked as high as 3.25% on Tuesday night.
The U.S. dollar also weakened. The ICE US dollar index fell 0.2%. The U.S. currency fell to 113.34 yen from 113.40 yen, and the euro climbed to $1.1455 from $1.1413.