U.S. stock futures opened little changed as traders assessed the impact on stock markets of President Joe Biden’s decision not to seek reelection ahead of a week packed with major earnings reports.
As of 6:02 p.m. New York time, S&P 500 index futures were up less than 0.1%. Bitcoin rose 0.7% as investors waited for a reaction to the political bombshell, while the dollar, a safe haven that investors turn to in times of turmoil, traded little changed.
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Politics remained the talk of Wall Street, but the impact on markets of Biden’s withdrawal was not easy to gauge. Biden has endorsed Vice President Kamala Harris as the Democratic candidate to face Republican Donald Trump.
Traders, already grappling with the uncertain course of Federal Reserve interest rates and the relative strength of the economy, must now consider how Harris and other challengers will fare against Trump. With four months to go until the election and many unknowns, traders are bracing for increased volatility over the summer months.
“This means more uncertainty in the near term,” said Gene Munster, co-founder and managing partner at Deepwater Asset Management. “There was a lot of confidence in a Trump victory, but the market is not going to like this new uncertainty, this news cycle about the unknowns of who’s going to stay and who’s going to go.”
The political unrest comes just before a week in which big tech stocks such as Alphabet Inc. and Tesla Inc. are due to report earnings. The S&P 500 fell 2% last week as investors grew more optimistic that the historic rally in tech stocks was faltering, while smaller companies benefited, with the Russell 2000 rising 1.7%, its second straight weekly gain.
Investors need to pay closer attention to politics as the rotation of tech stocks from winners to losers over the past 18 months continues, making market impacts increasingly difficult to predict.
“The market’s knee-jerk reaction to Sunday’s news may be to pull back hopes for a ‘red wave’ in November,” wrote Adam Crisafulli of the Vital Knowledge newsletter. “Biden’s presence has been a big drag on general Democratic poll numbers, so simply removing his name from the equation should tighten things up a bit.”
Still, some sectors tend to be more sensitive to political shifts than others, so investors worried about political influence are likely to focus on cryptocurrencies, private prison operators and fossil fuel companies when trading resumes on Monday. Other areas in focus include highly regulated groups such as finance and healthcare, as well as gun makers.
Immigration is one of the biggest issues in this election, and prison stocks GEO Group and CoreCivic have soared in recent weeks as Trump was expected to support both the public and private sectors on border security, with an emphasis on detention.
Trump’s aggressive outreach to crypto executives to win over undecided voters contrasts with Biden administration regulators who are skeptical of digital assets. As a result, Bitcoin has become an alternative bet on a Republican victory, surging after the presidential debate and again after the assassination attempt on Trump. If the trade unravels, stocks such as Coinbase Global, Marathon Digital Holdings, Riot Platforms, CleanSpark, MicroStrategy, Cipher Mining and Bitwise Crypto Industry Innovators ETF will be in the spotlight.
Fossil fuels are also a hotly contested issue between the two parties, but we may see some shifting given that Harris has been a vocal critic of fracking and has proposed climate change measures in the past that go beyond Biden’s plan. Stocks to watch include Baker Hughes, Exxon Mobil, ConocoPhillips, Occidental Petroleum, Williams Cos, Halliburton, Devon Energy and Chevron.
The recent enthusiasm for financial and health-care stocks could lose some steam as a Republican president is expected to be more lenient than a Democratic one. Investors will likely focus on big bank stocks, funds such as the Vanguard Financials ETF and credit-card companies such as Discover Financial Services Inc., Capital One Financial Inc. and Synchrony Financial Inc. Also in the spotlight will be managed-care companies UnitedHealth Group Inc., Humana Inc. and CVS Health Inc., which owns insurer Aetna.
Gun manufacturers are back in the spotlight, especially following the attacks on President Trump and the Supreme Court’s recent decision to strike down the bump stock ban. Smith & Wesson Brands Inc., Sturm, Ruger & Co. Inc. and retailers like Walmart that sell firearms may see some shakeups.
Meanwhile, electric vehicle stocks, from automakers to charging station operators, have struggled recently in the wake of Republicans’ anti-electric vehicle stance, and renewable energy companies, including solar and wind power companies, have also struggled given Democrats are widely seen as favorable to the sector.
Trump criticized Biden’s EV policies in his nomination speech on Thursday, saying he would “end the EV mandate on my first day in office.”That could leave EV makers Tesla Inc, Rivian Automotive Inc and Lucid Group Inc, charging companies ChargePoint Holdings Inc, Beam Global Inc and Blink Charging Inc, and battery metals companies Lithium Americas Inc and Albemarle Inc on shaky ground.
Companies with ties to China may also experience greater volatility as both parties take a tougher stance on trade policy, floating proposals for higher tariffs and tougher regulations, particularly on China.
But traders said that while volume could be high, overall activity is expected to be muted as Harris is expected to stick largely with Biden’s proposed policies.
“We’ll have to wait and see how the polls go over the next few months to see if Harris is gaining traction,” said Eric Deighton, president and managing director at The Wealth Alliance. “If she is, it’s going to be really hard to know which way to go with Republican and Democratic policies being so far apart.”
This article has been generated from an automated news agency feed without any modifications to the text.
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