The close: TSX surges nearly 300 points as Wall Street extends resounding post-election rally

No president, no problem.

Stocks extended their gains in a resounding rally on Thursday, even as the presidential contest between Donald Trump and Joe Biden showed no clear winner and the U.S. Federal Reserve warned that the pandemic continues to pose significant risks for the economy.

The S&P 500 rose nearly 2 per cent, continuing a winning streak that could deliver the best week of returns for the U.S. blue chip index since April.

While Wednesday’s remarkable gains heavily favoured big technology companies, Thursday’s moves were broader.

Banks, telecommunications firms, consumer-oriented companies and others sent the S&P 500 to within 2 per cent of its record high in September, suggesting that investors – relieved that the U.S. election is nearly over – are growing confident that the results will have a positive impact on business activity.

Within the Dow Jones Industrial Average, which rose 542 points, 28 of the 30 stocks in the index ended the day higher. JPMorgan Chase & Co., which slumped on Wednesday, rebounded 4.1 per cent on Thursday. Caterpillar Inc. rose 5.1 per cent and Boeing Co. rose 3.6 per cent.

“The market seems to have pivoted back to fundamentals," Ian de Verteuil, a strategist at CIBC World Markets, said in a note before markets opened, pointing to strong third-quarter earnings and valuations that appear reasonable relative to low interest rates.

He added: “This suggests equity strength should continue, subject to the vagaries of the virus.”

Many observers embraced the idea that Mr. Biden will ultimately prevail as president while Democrats hold the House of Representatives and the Republicans maintain control of the Senate, paving the way for a modest deal on economic stimulus as the pandemic rages but removing the chances of corporate tax hikes.

“Although we are still waiting for the final result of the U.S. election, the fact that a comprehensive ‘blue wave’ [where Democrats control the White House and Congress] is no longer a possibility suggests that the ultimate outcome will mean more continuity than change across a range of policy areas,” Oliver Jones, the senior markets economist at Capital Economics, said in a note.

“That is a reason to think that a couple of key features of the current market environment will endure – something arguably reflected in the ongoing reaction of both Treasuries and equities,” Mr. Jones said.

Government bond yields were relatively stable, after retreating on Wednesday, as investors bet that a divided Washington would lead to a smaller stimulus package and infrastructure spending. (Bond yields and bond prices move in opposite directions.)

The yield on the 10-year U.S. Treasury bond rose slightly to 0.78 per cent, up 1.1 basis points (there are 100 basis points in a percentage point).

Big technology stocks were again some of the biggest winners in the market, given that these companies stand to perform well under lockdowns, slow economic growth and the low interest rate environment that could follow a divided government in Washington.

The tech-heavy Nasdaq Composite Index rose 2.6 per cent, a day after rising 3.9 per cent. Among the standouts: Microsoft Corp. rose 3.4 per cent, Facebook Inc. rose 2.8 per cent and Netflix Inc. rose 3.5 per cent.

Stocks were strong outside the United States as well.

Canada’s S&P/TSX Composite Index increased nearly 300 points or 1.9 per cent, after turning in a lacklustre gain on Wednesday that lagged the global rally.

Barrick Gold Corp. surged 7.9 per cent after the gold producer reported a third quarter profit that beat analysts' expectations. The price of gold also helped: Gold, seen as a haven during tumultuous times, traded at US$1,951.30 an ounce, up US$55.

In other moves, Shopify Inc. rose 3.8 per cent and Canadian National Railway Co. rose 1.8 per cent.

Cannabis stocks rebounded too, after slumping the previous day when Democrats failed to turn in a resounding victory in U.S. elections. Canopy Growth Corp. rose 10.9 per cent.

The U.S. Federal Reserve left its key interest rate unchanged, as expected, and reinforced that it will act as needed to protect the economy. However, Jerome Powell, the Fed’s chair, remained cautious in his outlook – underscoring the fact that the rising stock market has diverged from a troubled underlying economy.

“Economic activity has continued to recover from its depressed second quarter level. In recent months, however, the pace of improvement has moderated,” Mr. Power said during a news briefing.

He added that the economic outlook is “extraordinarily uncertain” and called the rise in new coronavirus cases “particularly concerning.”

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