On Wall Street, indices jumped after Trump’s victory

On Wall Street, stock indices jumped more than 1 percent on Wednesday, after a major turnaround in which they recovered initial sharp losses caused by Donald Trump’s unexpected victory in the U.S. presidential election. The Dow Jones rose 1.40 percent to 18,589 points, while the S&P 500 increased by 1.11 percent to 2,163 points, and the Nasdaq index also rose 1.11 percent to 5,251 points.

The beginning of Wednesday did not foreshadow such a development as early in the morning, following Trump’s unexpected victory in the race for the White House, the futures S&P 500 index fell by 5 percent. Financial markets were shocked by Trump’s victory as they had been rooting for Hillary Clinton, whom they consider a status-quo politician, while Trump’s victory could create uncertainty regarding foreign, domestic, and economic policy. However, later losses in the futures indices eased as Trump’s first messages after the victory were balanced, raising hopes that his sharp rhetoric was merely part of the campaign.

– “The stock market behaves like a teenager. It has many demands but does not know what it really wants,” says Jake Dollarhide, director at Longbow Asset Management.

In the end, all major indices on Wall Street finished the day with gains of over 1 percent, with the highest stock prices rising in sectors expected to benefit from Trump’s victory. In the healthcare sector, prices rose on average by more than 3 percent as it became less likely that drug pricing practices would change in the U.S. after Trump’s victory. Clinton had claimed during her campaign that drug prices were too high and should be corrected. Stock prices in the financial sector also jumped by more than 3 percent as Trump had announced easing restrictions for banks during his campaign. On the other hand, prices in the real estate sector fell by 2.3 percent yesterday, and in the utilities sector by more than 3 percent.

– “Everything Trump mentioned during the campaign, every industry he referred to, whether in a favorable or unfavorable context, saw significant movements yesterday,” says Tim Ghriskey, director at Solaris Group.

The calming of the market is also indicated by a 23 percent drop in the VIX ‘fear’ index of the Chicago Options Exchange, its largest daily drop since June. Early Wednesday morning, this index had jumped by 40 percent. The drop in the VIX index shows that investors are less hedging their portfolios against potential further declines in stock prices.

In addition to the large fluctuations in the indices, the volatile trading is also indicated by the high volume. On U.S. exchanges, 11.7 billion shares changed hands yesterday, while the average daily volume over the past 20 days was 7 billion.

European exchanges also saw stock prices rise yesterday after an initial decline. The London FTSE index strengthened by 1.0 percent to 6,911 points, while the Frankfurt DAX jumped 1.56 percent to 10,646 points, and the Paris CAC rose 1.49 percent to 4,543 points.

This morning, stock prices continued to rise for the fourth consecutive day as investors focused on Trump’s political priorities, including tax cuts and increased investments in infrastructure and defense, as well as loosening regulations for banks. Among the biggest winners this morning, with a rise of 3.2 percent, is the mining sector, thanks to rising metal prices. Stock prices in the banking sector also rose sharply by 3 percent.