Stocks jump on US Election Day as investors await outcome

U.S. stocks rose sharply on Tuesday as new data showed a strong economy, though investors prepared for unpredictable trading during an extremely close U.S. presidential election.

The Institute for Supply Management reported that its services sector index reached 56.0 last month, the highest level since August 2022. Meanwhile, the election between Republican Donald Trump and Democrat Kamala Harris remained too close to call, with final results potentially taking days to determine. Trump’s chances improved Tuesday according to betting markets, which many investors watch as election indicators.

Stock market numbers showed significant gains across the board. The S&P 500 rose 70.42 points (1.23%) to close at 5,783.11. The Nasdaq Composite increased by 259.19 points (1.43%) to 18,439.17, while the Dow Jones Industrial Average climbed 431.42 points (1.04%) to 42,227.74.

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Though stocks remained steady, government debt and currency markets saw more dramatic swings. The 10-year U.S. Treasury note yield initially jumped more than 10 basis points to 4.366% before settling slightly lower after a successful auction.

The stock market avoided Monday’s ups and downs thanks to several positive factors: strong corporate earnings, lower interest rates, and a healthy job market, all suggesting a “soft landing” for the economy. However, Tuesday’s economic data also showed the trade deficit reached its highest point in two and a half years during September. This increase came as domestic demand drove up imports, while concerns about higher tariffs under a potential Trump presidency led businesses to stock up on imports early.

While the CBOE Volatility Index (Wall Street’s “Fear Gauge”) remained slightly above its long-term average of 19.46, it had decreased from its near two-month high of 23.42 from last week. Industrial and consumer discretionary sectors led the S&P 500’s gains.

Investors are also watching Congressional elections closely to see who will control Washington. Many analysts expect a split government, which would make it harder for the president to make major policy changes.