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Stocks and Bitcoin rise after Trump’s victory. So worry about inflation as the Dow rises 1,500

Online Niel November 8, 2024

Stan Choe
| Associated Press

new york – The US stock market, Elon Musk’s Tesla, banks and bitcoin are all higher on Wednesday as investors bet on what Donald Trump’s return to the White House will mean for the economy and the world. Among the losers the market sees: solar companies and potentially anyone worried about higher inflation.

The S&P 500 rose 2.5% for its best day in nearly two years. The Dow Jones Industrial Average rose 1,508 points, or 3.6 percent, while the Nasdaq composite rose 3 percent. All three indexes broke records they set in recent weeks.

The U.S. stock market has tended to rise regardless of which party wins the White House, with Democrats posting bigger average gains since 1945. But Republican control could mean big changes in the winning and losing industries below the surface, and investors are adding to their bets . built earlier on what will mean the higher tariffs, lower tax rates and lighter regulations that Trump favors.

“Markets are struggling to figure out what will happen next, but for now the market is pricing in higher growth and a higher inflation outlook,” said Peter Esho of Esho Capital.

Of course, how much change Trump’s second term will effect will likely depend on whether his fellow Republicans win control of Congress, and that remains to be seen. That could leave room for snaps back into some of the big knee moves on Wednesday.

However, the market is splitting into pretty clear winners and losers following Trump’s dramatic win. Among them:

Bank actions, UP

Bank stocks led the market higher, in part on hopes that a stronger economy would mean more customers taking out loans and paying them back with interest. They also rallied on hopes of lighter regulation from a Republican White House. JPMorgan Chase rose 11.5% and financial stocks were by far the biggest gainers among the 11 sectors that make up the S&P 500. Capital One Financial climbed 15% and Discover Financial rose 20.2% for some of the market’s biggest gains from speculation await. the merger will get federal approval more easily under Trump.

Crypto, UP

Trump pledged to make the country the “crypto capital of the planet” and create a “strategic reserve” of bitcoin. The price of bitcoin hit an all-time high of more than $76,480, according to CoinDesk, and was recently just below $76,100. Companies in the crypto industry also rose, including the 31.1% jump of trading platform Coinbase.

Tesla, UP

Musk has become a close ally of Trump, pushing to be the former president’s running mate. While Trump could end up hurting the EV industry overall by limiting government subsidies, analysts say Tesla could gain somewhat of an advantage by already being such a big player in the industry. Tesla rose 14.8 percent, while rival Rivian Automotive fell 8.3 percent.

Trump Media & Technology Group, UP

The company behind Trump’s Truth Social platform rose 5.9 percent, after nearly 35 percent earlier in the day. They regularly trade more on Trump’s popularity than profit prospects. Its increase came even as it filed unaudited financials with regulators on Tuesday, saying it lost $19.2 million in the latest quarter and that its sales were down from a year earlier.

Private prison operators, UP

A Trump-led Washington could push for stricter enforcement of the nation’s borders, which could mean more business for companies that work with U.S. Immigration and Customs Enforcement, or ICE. GEO Group, which runs ICE processing centers, rose 42.1%.

Shares of smaller companies, UP

Trump’s America-First policies could help companies that focus on customers in the United States, rather than large multinationals that could be hurt by rising tariffs and protectionism. The Russell 2000 index of smaller stocks, which are seen as more domestically focused than the large-cap S&P 500, rose 5.8 percent. That was more than double the S&P 500’s gain.

Treasury bond prices down

Investors see Trump’s policies as likely to lead to stronger economic growth, which helps lower Treasury prices and raise their yields. Tax cuts under Trump could further increase the US government’s deficit, which would increase its borrowing needs and force yields even higher. The 10-year Treasury yield rose to 4.43 percent from 4.29 percent late Tuesday, a major move for the bond market. That’s up substantially from August, when it was below 4%.

Inflation Concerns, UP

Investors also see Trump’s policies as likely to increase future inflation, particularly tariffs, which can add costs to US household bills.

“Trump is openly telling people that he’s going to raise tariffs not just on China, but on every trading partner,” said Andrzej Skiba, head of BlueBay US Fixed Income at RBC Global Asset Management. “We are talking about 10% tariffs for all global partners. This is a big problem because it could add 1% to inflation. If you add 1% to next year’s inflation numbers, we’d have to say goodbye to rate cuts.”

A drop in immigration could also mean a drop in workers available to employers, which could force companies to raise workers’ wages faster and put more upward pressure on inflation.

Interest rate cut expectations CONTESTED

Much of Wall Street’s run to record highs this year has been built on expectations of future interest rate cuts by the Federal Reserve, now that inflation appears headed back toward its 2 percent target. Easier interest rates help stimulate the economy, but they can give inflation more fuel.

The Fed will announce its latest interest rate decision on Thursday, where expectations are still for a cut, according to CME Group data. But traders are already scaling back forecasts of how much the Fed will cut by the middle of next year.

Foreign currencies, DOWN against the dollar

Trump has vowed to sharply raise tariffs on imports from China, Mexico and other countries, raising concerns about trade wars and disruptions to the global economy. A measure of the U.S. dollar’s value against several major currencies rose 1.6 percent, while other currencies fell.

The euro sank 1.5% and the South Korean won fell 1.2% The Mexican peso, which has been falling against the dollar since the summer in part on worries about a possible Trump re-election, fell to the beginning of the day, but then reduced his. loss.

Renewable energy stocks, declining

Trump is a fan of fossil fuels, encouraging the production of oil and natural gas. Its gain led to a sharp decline in solar stocks, including a 10.1% drop for First Solar and a 16.8% drop for Enphase Energy.

The only stock with a bigger loss in the S&P 500 was Super Micro Computer, which said its sales for the latest quarter may be below its previous forecast. Its stock fell 18.1%.

Overall, the S&P 500 rose 146.28 points to 5,929.04. The Dow rose 1,508.05 to 43,729.93 and the Nasdaq composite rose 544.29 to 18,983.47.