U.S. stocks rose in heavy trading Wednesday as shares of banks, pharmaceutical companies and defense contractors rallied over speculation President-elect Donald Trump will pursue business-friendly policies.
Asian stock markets stumbled shortly after Trump overtook Hillary Clinton in the presidential vote count early Wednesday. From there, Wall Street appeared set for a slump of its own, only it never materialized.
Trump's acceptance-speech pledge to unify a divided nation helped steady global financial markets, with Asian stocks recovered today.
"He took on a remarkably conciliatory posture," said Eric Wiegand, senior portfolio manager at the Private Client Reserve at U.S. Bank. "That went a long way to demonstrating, perhaps for the first time or very few times, his presidential disposition, and gave a greater sense of calm."
Despite wavering in the first hour of trading, U.S. stocks rallied the rest of the day, lifting the Dow Jones industrial average within 50 points of a record-high close.
The Dow jumped 256.95 points, or 1.4 percent, to 18,589.69. The average was briefly up 317 points.
The Standard & Poor's 500 index gained 23.70 points, or 1.1 percent, to 2,163.26. The Nasdaq composite index rose 57.58 points, or 1.1 percent, to 5,251.07.
"People focus on the fact that his acceptance speech kind of changed the direction of the market," said Krishna Memani, New York-based chief investment officer at Oppenheimer Funds Inc. "It was far more conciliatory and far more fiscal-focused than these acceptances typically are -- that made a world of difference."
Wall Street largely had seen Clinton as more likely to maintain the status quo while viewing Trump's polices as less clear. Investor anxiety ratcheted up in recent weeks as the race tightened, leading to a nine-day slump for the market that ended Monday. By Election Day, the market had mostly bounced back and priced in a Clinton win.
On Wednesday, faced with Trump as president, traders piled into health care and financial stocks -- sectors seen as likely to struggle under a Clinton administration. They also sold off safe-haven stocks such as utilities and consumer-focused companies.
Financial companies led the gainers, surging 4.1 percent. Banks and other financial stocks tend to benefit from higher interest rates and less government regulation, two things investors anticipate could happen during a Trump presidency.
Health care companies climbed 3.4 percent. The sector has taken a beating this year, reflecting in part fears that a Clinton presidency would lead to drug-price controls that could hurt drugmakers and biotechnology companies.
Utilities were down the most, sliding 3.7 percent, followed by consumer-focused stocks, down 1.3 percent.
Billionaire investor Carl Icahn was among those who seized on Trump's win to play the market. The billionaire told Bloomberg that he put about $1 billion "to work" on stocks early Wednesday.
Investors hope Trump's plans for infrastructure spending, tax cuts and lighter regulation will benefit the economy. They expect those spending plans will call for issuing more debt.
A sell-off in bonds sent prices tumbling, driving the yield on the 10-year Treasury note up to 2.08 percent from 1.86 percent late Tuesday. That's the highest the rate has been since January. That yield is a benchmark used to set interest rates on many kinds of loans including home mortgages.
Traders are selling bonds to hedge against the possibility that interest rates, which have been very low for years, could rise steadily again under a Trump administration, said Tom di Galoma, managing director of trading at Seaport Global Securities.
"People are starting to believe that Donald Trump is good for the economy, which makes him not so good for the bond market," di Galoma said. "You've also had the stock market come back overnight. People are starting to realize that a Trump presidency is not the end of the world."
As the initial turbulence eased, odds for a Federal Reserve interest-rate increase in December climbed back to levels seen before Trump's victory, after plunging below 50 percent while the outcome unfolded. The market-implied chance of a move next month is 86 percent, the same as the probability on Tuesday afternoon.
"The U.S. that Trump inherits is doing pretty well economically," said Nandini Ramakrishnan, a strategist at JPMorgan Asset Management in London.
Traders bid up shares in defense contractors, anticipating the companies will thrive under a Trump presidency. Northrop Grumman climbed 5.4 percent, while Lockheed Martin rose 6 percent. Raytheon added 7.5 percent.
Firearm sales typically surge when a presidential candidate who favors an expansion of gun-control laws is elected. That's not the case with Trump, however. That gave investors a reason to sell shares in firearm makers. Smith & Wesson slid 15.2 percent, while Sturm, Ruger & Co., fell 14.4 percent.
Markets in Europe posted solid gains.
Germany's DAX rose 1.6 percent, while France's CAC-40 gained 1.5 percent. The FTSE 100 index of leading British shares was 1 percent higher.
The Mexican peso fell sharply, declining 8 percent against the dollar on the concern that Trump would upset the trade relationship between the U.S. and Mexico. The U.S. currency rose sharply to 19.87 Mexican pesos from 18.42 pesos.
In the coming weeks, investors will be watching the U.S.' trade relations with China and its effect across Asia. Trump's victory has raised concerns that the U.S. and China might embark on a trade war of sorts and that protectionism around the world will grow.
Those concerns weighed heavily on Asian stocks before today's rebound. Japan's Nikkei 225 index closed 5.4 percent lower Wednesday but was up 5.7 percent by midday today. Hong Kong's Hang Seng had added 2 percent by midday after closing 2.2 percent lower the day before.
U.S. crude-oil prices closed higher after being down earlier in the day. Benchmark U.S. crude rose 29 cents to close at $45.27 a barrel in New York. Brent crude, used to price international oils, gained 32 cents to close at $46.36 a barrel in London.
Information for this article was contributed by Alex Veiga, Kelvin Chan and Pan Pylas of The Associated Press and by Anna-Louise Jackson, Rebecca Spalding, Dani Burger, Julie Edde, Joseph Ciolli, Aleksandra Gjorgievska, John Hyland and Lu Wang of Bloomberg News.
Business on 11/10/2016