NEW YORK (AP) — Wall Street is piling into stocks of smaller companies, banks and other businesses that would be winners if Washington can prop up the economy with another dose of financial support, as expectations rise that Democrats may take control of Washington.
Most stocks across Wall Street were higher after Democrats won one of the two runoff elections in Georgia that will determine which party controls the Senate. The second runoff was still too early to call, and the S&P 500 was up 1.4% in afternoon trading. The Dow Jones Industrial Average was up 595 points, or 2%, at 30,986, as of 12:58 p.m. Eastern time.
The moves masked even bigger shifts happening underneath the surface as investors jockey to find the winners and losers of a Senate, White House and House of Representatives that may all soon be under Democratic control. The yield on the 10-year Treasury topped 1% for the first time since March, for example.
Big Tech stocks are also in the spotlight as investors shift away from the winners of the stay-at-home economy of the pandemic and rotate into companies whose profits would benefit most from a healthier economy. The Nasdaq composite, which is full of tech stocks, struggled for much of the morning and was up a more modest 0.5%.
A report on Wednesday underscored how fragile the economy is because of the worsening pandemic. Payroll processor ADP said private employers cut 123,000 more jobs last month than they added. It was much worse than economists’ expectations for job growth, and it was the weakest such report since April. The Labor Department’s more comprehensive report on jobs growth is due on Friday.
The Russell 2000 index of small-cap stocks nevertheless soared 4.6%, much more than the rest of the market. Another round of stimulus for the economy could benefit smaller companies in particular because they tend to have smaller financial cushions to survive long-term downturns.
Stocks of companies that would profit from increased spending on infrastructure were also helping to lead the market. United Rentals, whose catalog includes forklifts and light towers for construction sites, jumped 10.9% for one of the bigger gains in the S&P 500. Vulcan Materials, which sells asphalt and other construction materials, rose 10%.
“More fiscal support forthcoming likely means a stronger economic recovery and markets are pricing that in,” said Brian Levitt, global market strategist at Invesco. “Today is the recovery trade.”
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