Banks, healthcare lead post-election rally on Wall Street

By Chuck Mikolajczak

NEW YORK (Reuters) - U.S. stocks rallied on Wednesday in a dramatic turnaround from overnight losses fuelled by the upset victory of Republican Donald Trump as investors poured into sectors that appeared poised to benefit from the policies of a Trump presidency.

Markets oscillated between gains and losses in choppy morning trade. Heading into the latter stages of trading, each of the three major stock indexes were solidly in positive territory in the wake of Trump's win.

Gains of 3 percent each in the heavily weighted healthcare <.SPXHC> and financials <.SPSY> sectors pushed indexes higher. Bond proxy sectors such as real estate <.SPLRCR>, down 2.2 percent, and utilities <.SPLRCU>, each off more than 2 percent, were the worst performers.

 

"When you look at Trump's plans, they are actually pro-market," said Nadia Lovell, U.S. Equity Strategist at J.P. Morgan Private Bank in New York.

"Increased fiscal spending, that's great for infrastructure and defence names, less regulations that help banks, less involvement in healthcare - things that worried the market before."

Trump's plans are reflationary policies, intended to increase economic output by lowering taxes and boosting spending.

A curb on drug pricing was a key campaign theme for Democratic nominee Hillary Clinton, while Trump has called for repealing the Affordable Care Act and loosening restrictions on banks enacted after the financial crisis.

The Dow Jones industrial average <.DJI> rose 182.57 points, or 1 percent, to 18,515.31, the S&P 500 <.SPX> gained 16.79 points, or 0.78 percent, to 2,156.35 and the Nasdaq Composite <.IXIC> added 28.93 points, or 0.56 percent, to 5,222.42.

Through the night, financial markets reacted violently to the election results as Clinton's path to victory narrowed. The S&P futures slid 5 percent and hit a limit down, meaning the contract could not trade lower, only sideways or up. Dow Industrials futures briefly fell 800 points.

Republicans maintained their majorities in both chambers of the U.S. Congress, potentially enabling the party to reshape Washington with two years of "unified" government.

"Regardless of the fact you had a Republican sweep, there are still checks and balances in place," said Art Hogan, chief market strategist at Wunderlich Securities in New York.

"So you are going to have some of your more fiscally conservative Republicans that will certainly slow (Trump) down from doing anything crazy in terms of policy changes."

Wall Street is typically seen as preferring gridlock, or shared control of the White House and Congress, than a sweep of both chambers of Congress and the presidency.

CBOE Volatility index futures shot nearly 40 percent higher at one point, reflecting investors' reservations about a Trump presidency, but sharply retraced the advance after Trump's acceptance speech. During the session the CBOE Volatility index <.VIX> was down 16.9 percent, on track for its biggest daily drop since late June.

Big pharmaceutical shares gained, with Pfizer jumping 8.1 percent to $32.42 as the biggest boost to the S&P 500. The iShares Nasdaq Biotechnology ETF surged 8 percent and was on track for its biggest daily percentage gain in eight years.

Among financials, JPMorgan Chase shot up 5.2 percent to $73.70, on pace for its best day in nine months, while Wells Fargo rose 6.3 percent to $48.40.

(Additional reporting by Rodrigo Campos, Tanya Agrawal and Yashaswini Swamynathan; Editing by Jeffrey Benkoe and James Dalgleish)