Tech, health stocks rise, cyclicals fall on prospects of divided U.S. Congress

In this news, we discuss the Tech, health stocks rise, cyclicals fall on prospects of divided U.S. Congress.

(Reuters) – High tech stocks have boosted the S&P 500.SPX and healthcare gainers were the winners on Wednesday, with investors betting a divided US government would reduce the chances of big reforms for these sectors or hikes corporate tax.

But economically sensitive cyclical sectors – materials, industrials and banking – retreated as they were expected to benefit the most from a major stimulus package that is now deemed unlikely after Tuesday’s US election.

If Republicans retain control of the US Senate and Democrats retain their majority in the House of Representatives, as investors expect, any fiscal stimulus package will likely be smaller than under a Democrat-controlled government.

The main Wall Street indexes surged with the outperformance of Nasdaq .IXIC technology. [.N]

Here are the key players as investors digested the election results and waited for news on Democratic challenger Joe Biden’s chances of defeating President Donald Trump.

GREAT TECHNOLOGY

Technology the mega-caps were requested because they are less dependent on stimulating growth but would have been penalized by increases in corporate tax rates and by stricter regulations expected of Democrats. Also, the Federal Reserve could keep rates lower for longer without a massive stimulus.

Microsoft Corp MSFT.O, Apple Inc AAPL.O, Amazon.com Inc AMZN.O, Facebook Inc FB.O and Alphabet Inc GOOGL.O were among the biggest boosters in the market with gains of between 4% and 8%.

“Less regulatory risk and less tax risk is more constructive for these growth names,” said Lauren Goodwin, economist and multi-asset portfolio strategist at New York Life Investments.

CHINESE STOCKS LISTED IN THE UNITED STATES

The iShares MSCI China ETF MCHI.O closed up 4.4% after hitting a record high, with investors betting a Biden presidency would mean less trade tensions between the United States and China.

Shares of Baidu Inc BIDU.O rose 4.6%, while Alibaba Group Holding Ltd BABA.N rose 3.5% and JD.Com Inc JD.O rose 8%.

HEALTH CARE

Healthcare sector S&P .SPXHC led percentage gains to close at 4.5%.

“Even in the case of a Biden presidency, reforming the health care sector would be much more difficult without strong congressional support,” Goodwin said of New York Life.

Health insurer Unitedhealth Group UNH.N rose 10%, providing the biggest gain in index points in the industry, while Cigna Corp CI.N and Anthem Inc ANTM.N also posted percentage gains to two. figures. Merck & Co MRK.N rose 4.8% and Regeneron Pharmaceuticals Inc REGN.O rose 5.4%.

(GRAPHIC: Trump vs Biden stock baskets -)

BANKS

The S&P 500 banking sector .SPXBK fell nearly 4% as bond yields fell and investors feared that weaker budget spending could weigh on credit.

Among the largest banks, Bank of America BAC.N fell 4% and JP Morgan JPM.N and Citigroup Inc CN fell more than 3%. Comerica Inc CMA.N, M&T Bank Corp MTB.N and Zion Bancorporation NA ZION.O fell more than 10%.

ALTERNATIVE ENERGY

The Invesco Solar ETF TAN.P closed 2% lower, although above its session low. the alternative The energy exchange-traded fund had gained more than 40% from its September low as clean energy was a key part of Biden’s agenda. The iShares Global Clean Energy ICLN.O ETF fell 1.3%.

“The fact that Republicans likely retain a majority in the Senate would make it virtually impossible for Biden (if he wins) to enact his major climate reforms,” ​​Raymond analyst James Pavel Molchanov said.

FSLR.O shares of solar power company First Solar Inc. fell 8.6% while JinkoSolar JKS.N lost 12% of its value.

INDUSTRIAL

Shares of industrial and building materials companies such as Caterpillar CAT.N, Vulcan Materials VMC.N and Jacobs Engineering JN slipped between 6% and 9% as hopes dimmed for infrastructure spending plans by democrats.

MARIJUANA

Major cannabis producers have collapsed even as New Jersey voted to legalize marijuana. The industry had exploded after the vice-presidential debate, when Kamala Harris, Biden’s running mate, vowed to decriminalize marijuana at the federal level.

ETFMG Alternative Harvest ETF MJ.N lost 3%.

Shares of Tilray Inc. TLRY.O fell 9%, while US listings of Canadian firm Canopy Growth Corp CGC.N fell 7%.

DEFENSE

Defense firm Northrop Grumman NOC.N rose 3.5% while Lockheed Martin LMT.N added 2.4% on Republicans’ expectations to retain control of the Senate.

“It removes the threat of a blue wave and ‘progressive’ Democrats trying to take an ax from the Defense Department’s budget to fund other spending priorities,” said Robert Stallard, analyst at Vertical Research Partners.

Additional reports from Trisha Roy, Arunima Kumar and Ankit Ajmera in Bengaluru; Edited by Patrick Graham, Bernard Orr, Shounak Dasgupta and Richard Chang

Original © Thomson Reuters

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