Wall Street Surges on Hopes of Trump Presidency and Fed Rate Cuts

Wall Street gained ground on Monday, building on Friday’s rally as increasing expectations of a second Donald Trump presidency in the wake of a failed assassination attempt raised hopes of a looser regulatory environment. The growing probability that the U.S. Federal Reserve will begin cutting its key interest rate as soon as September also helped stoke risk appetite.

All three major U.S. stock indexes were modestly higher, having pared earlier gains. Economically sensitive small caps and transportation stocks handily outperformed the broader market.

An assassination attempt in Pennsylvania on Saturday of Trump, the presumptive Republican nominee for president, appeared to improve his chances for election. A Trump presidency would presumably result in a more hawkish trade policy, an extension of tax cuts and deregulation in a host of issues ranging from climate change to cryptocurrencies. Online betting site PredictIt showed bets of an election win at 67 cents for Trump, after the assassination attempt, up from Friday’s 60 cents, with a victory for Democratic U.S. President Joe Biden at 26 cents.

“Trump was the prohibitive favorite even before the weekend and the kind of industries that would underperform under a Trump presidency were probably already set up to do so,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. “I’m not surprised to see some of those same trades today.” Stocks were also buoyed by ongoing optimism that the U.S. Federal Reserve will enter its expected interest rate cutting phase as early as September, with as many as three total cuts by the end of the year.

“A September (rate) cut has been all but cemented,” Mayfield added. “We’re sitting almost exactly where we were seven months ago, which is the promise of Fed rate cuts without a recession. It’s still very much predicated to the Fed coming to the party.” Speaking before the Economic Club of Washington, Fed Chair Jerome Powell reiterated on Monday his belief that the U.S. economy can avoid recession, and recent data readings show progress in bringing inflation down to the central bank’s 2% goal.

At 2:19 p.m. EDT, the Dow Jones Industrial Average rose 177.67 points, or 0.44%, to 40,178.57, the S&P 500 gained 12.17 points, or 0.22%, to 5,627.52 and the Nasdaq Composite added 38.98 points, or 0.21%, to 18,437.42. Among the 11 major sectors of the S&P 500, energy shares were enjoying the biggest percentage gain, while utilities were the laggards.

Goldman Sachs’ second-quarter profit more than doubled, beating analyst estimates on solid debt underwriting and fixed-income trading. The broker’s shares were last up 1.8%. Investment management firm BlackRock’s assets under management hit a record high, and it also reported an 8% jump in revenue. The company’s stock inched 0.3% higher.

Shares of Macy’s Inc dropped 11.9% after the department store scrapped buyout talks with Arkhouse Management and Brigade Capital. The prospect of a second Trump presidency sent shares of Trump Media & Technology Group soaring.

Crypto stocks also fared well, with Coinbase Global, Marathon Digital holdings and Riot Platforms up between 8.9% and 10.9%. Other stocks that are expected to benefit from Trump’s possible second term climbed, with Gunmaker Smith & Wesson and prison operator GEO Group gaining 11.8% and 9.2%, respectively.

On the downside, solar energy firms slid as the prospect of Trump’s election dimmed prospects for renewable energy U.S. subsidies. Shares of Sunrun and SolarEdge Technologies tumbled 9.9% and 14.4%, respectively.

U.S.-listed shares of Chinese companies also declined on fears of tightened trade restrictions under another Trump administration. IShares China Largecap ETF fell 2.2%.

Advancing issues outnumbered declining ones on the NYSE by a 1.45-to-1 ratio; on Nasdaq, a 1.42-to-1 ratio favored advancers. The S&P 500 posted 60 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 189 new highs and 28 new lows.

(With inputs from agencies.)

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