Dow sees biggest single-day gain in two years as Wall Street applauds election results

Wall Street applauded former President Donald Trump’s victory in the presidential election on Wednesday, powering the Dow Jones Industrial Average to its biggest single-day gain in two years as investors bet that stocks would benefit from his return to the White House.

The Dow soared roughly 1,500 points, or more than 3.5 percent, to close at 43,729.93. The broader S&P 500 gained 2.5 percent to end at 5,929.04, and the tech-heavy Nasdaq advanced 3 percent to settle at 18,983.47. The Russell 2000 index of small-cap stocks added more than 5.8 percent to close at 2,392.92.

Trump’s victory and the possibility of a Republican sweep of government buoyed investor hopes that his reelection could usher in an era of loosened government regulation and lower taxes, analysts said.

The Chicago Board Options Exchange’s CBOE Volatility Index, known as Wall Street’s “fear gauge,” was down about 18 percent Wednesday morning. Avoiding a protracted period of election uncertainty helps because “Wall Street prefers predictability,” said Michael Farr of the investment firm Farr, Miller and Washington.

Many investors welcomed the prospect of tax cuts and less regulation promised by Trump during his campaign, analysts said.

“Financials and Energy are the obvious beneficiaries of Trump’s victory amid hopes of deregulation and a greater focus on U.S. energy independence,” David Bahnsen, chief investment officer with the Bahnsen Group, said in comments shared Wednesday with The Washington Post.

But other elements of his economic message might not resonate well in the long run, said Farr and Yung-Yu Ma, chief investment officer at BMO Wealth Management.

“There is also uncertainty over tariffs, which is driving up long-term interest rates,” Ma said, adding that “international markets are very exposed to tariff policy,” which could hurt global stocks.

In about two-thirds of presidential election years since World War II, the S&P 500 has finished the year higher than it was on Election Day, according to an analysis of S&P Global data by Sam Stovall, chief investment strategist for CFRA Research.

The end-of-year gains or losses mostly reflect what was going on in the financial world at the time, Stovall said. Investors respond to a vast array of global market data, including interest rates, bond yields and price changes of obscure commodities.

The S&P 500 shed 7.8 percent in the weeks after Election Day in 2000, for example, but those losses happened in the wake of the tech meltdown known as the dot-com crash. It shed 10.2 percent after Election Day in 2008, when Barack Obama bested John McCain amid the onset of the Great Recession.

By contrast, the market gained 4.6 percent in 2016 when Trump beat Hillary Clinton, and 11.5 percent when he lost to Joe Biden in 2020.

The relationship between presidential election politics and the stock market’s performance can be summed up in terms of how much certainty investors have about what happens next, two analysts told The Post. The lead-up to an election breeds uncertainty, and the crowning of a winner resolves that tension.

“Once the election has concluded, investors in a sense breathe a sigh of relief,” Stovall said Tuesday.

Some specific investments seen as possible beneficiaries of a Trump win also rose Wednesday.

Trump Media & Technology Group, the Truth Social parent company whose stock has been very volatile in recent weeks, shot higher at the market open and although it settled quickly, it remained about 6 percent higher at market close. Tesla, whose founder Elon Musk has been a vocal Trump supporter, rose more than 14 percent.

Trump during the election campaign took an aggressive stance on international trade, having recently threatened to place tariffs as high as 100 percent on goods from Mexico, the biggest U.S. trading partner last year.

“Huge, seemingly mercurial tariffs and increased isolationism are patently unsound economic practices,” Farr said. “I believe this initial enthusiasm will soon be tempered, and it should be.”

The possibility of lower business taxes and less regulation is leading to “a repricing of the potential for smaller companies,” U.S. Bank national investment strategist Tom Hainlin said, noting the Russell 2000’s gains.

Shares of big banks were bolstered. Expectations of more lax regulation under the Trump administration is fueling hopes of greater activity in mergers and acquisitions, which had slowed under Biden, Bahnsen noted.

Wells Fargo, Goldman Sachs, Morgan Stanley and JPMorgan Chase each climbed more than 11 percent.

Certain shares of Fannie Mae spiked by more than 60 percent, as hedge funds and other investors bet Trump will revive long-dormant plans to return the mortgage-finance company and its companion firm Freddie Mac to private hands, releasing them from 16 years of government control.

The mortgage giants were effectively nationalized at the height of the Great Recession.

Also Wednesday, cryptocurrencies soared as optimism flooded the industry given Trump’s stated desire to turn the United States into the world’s “crypto capital.” Bitcoin had risen more than 9 percent while ethereum rose more than 11 percent by late afternoon.

Beyond the outcome of the presidential election, investors were also focused on state results, given that a sweep in either party’s direction could lead to a significant shift on major issues such as government spending and tax policy.

Investors were also awaiting remarks from Federal Reserve Chair Jerome H. Powell regarding further cuts to the central bank’s benchmark interest rate. Powell is widely expected to announce a cut of 25 basis points when the Fed’s meeting concludes Thursday.

The election comes during a strong period for U.S. stocks, with the Dow, S&P 500 and Nasdaq all just weeks removed from their most recent record highs.

Bonds fell as stocks surged, with the yield on the 10-year U.S. Treasury note climbing 4 percent in morning trading. Bond yields move inversely to prices.