By Geoffrey Smith
Investing.com -- U.S. stock markets opened sharply higher on Wednesday as Joe Biden edged ahead in a presidential election that failed to produce a clear winner overnight.
With most votes counted, the Democratic former vice president had overturned early deficits to enjoy wafer-thin advantages in the crucial swing states of Wisconsin and Michigan. If he wins these two and the state of Nevada, where counting is also still ongoing, his victory would be more or less assured.
However, at least part of the positive reaction from stocks was due to signs that the Senate will stay in Republican hands, reducing the prospect of a hefty increase in capital gains tax under a unified Democratic Congress.
By 9:37 AM ET (1437 GMT), the Dow Jones Industrial Average was up 117 points, or 0.4%, while the S&P 500 was up 1.1% and the Nasdaq Composite was up 2.8%.
Michael Townsend, a political analyst with Charles Schwab (NYSE:SCHW), said via Twitter that two more years of a divided Congress, as seems likely, would mean "no big tax changes, no end of filibuster, no packing the (Supreme) Court, not much of anything from a legislative standpoint."
Most importantly, from a short-term market perspective, he added that it means "Modest, not massive, stimulus package probably waits until early 2021."
Mohamed El Erian, chief economic advisor at Pimco parent Allianz (DE:ALVG), also noted to CNBC that it means more pressure on the Federal Reserve to act, when it announces the results of its latest policy meeting on Thursday. His comments came just ahead of a much weaker-than-expected private payrolls report from ADP, which set a gloomy tone ahead of the official U.S. labor market report for October, which is due on Friday.
ADP said the private sector created only 365,000 jobs in October, well below the 650,000 consensus forecast, in a sign that the labor market rebound is flattening out as a new wave of Covid-19 threatens the U.S.. Deaths from the coronavirus topped 1,000 on Tuesday, while hospital admissions are now at their highest in over three months. The ISM non-manufacturing purchasing managers index for October also fell by more than expected.
Among individual stocks, the big winners included Uber (NYSE:UBER) and Lyft (NASDAQ:LYFT) . after California voters approved a ballot exempting them from a new law that would have forced them to reclassify drivers as employees, with all of the attendant non-wage costs that implies. Uber stock rose 11.8% while Lyft rose 12.1%.
Health insurance stocks also gained strongly, as the prospect of deadlock in Congress reduced the risk of a major overhaul that would hit the sector's profitability. Cigna (NYSE:CI) stock rose 12.5%, while Anthem (NYSE:ANTM) stock rose 8.9% and UnitedHealth (NYSE:UNH) stock rose 8.5%.