Today’s stock market: Stocks rise amid broad election day rally

Stocks edged lower at the open on Tuesday and rose in the regular session amid a broad but tech-led rally as Americans headed to the polls to elect their next president.

Strong earnings and a healthy reading on US business activity provided further impetus for bulls a day before the Federal Open Market Committee (FOMC) convenes for its next policy meeting. On Tuesday, the CME FedWatch tool priced in a 97.4% probability that the FOMC will announce a quarter-point rate cut when his meeting ends on Thursday, down from a 98% chance on Monday.

The U.S. dollar weakened against a basket of overseas currencies and the yield on the 10-year U.S. Treasury note was higher as investors digested recent economic data and made incremental adjustments to bets on post-election politics. The general expectation is that regardless of who occupies the White House on January 20, 2025, US debt will continue to rise, with positive short-term implications but potential long-term consequences for growth.

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“Investors should look beyond the election and focus on the fundamentals of what’s driving the markets,” said James Demmert, chief investment officer of Main street research. “The economy and earnings continue to be better than expected, most stocks are reasonably priced, and the Fed is in an accommodative mode and is expected to cut interest rates again this week.”

Indeed, as Demmert notes, “There’s an excellent backdrop for stocks right now.”

And as Kiplinger’s Dan Burrows writes, “Retail investors are better served if they don’t participate in this arguably neurotic behavior” of trying to price and re-price different asset classes based on who wins today’s election . “That’s because,” concludes Burrows, “when it comes to long-term investing, it doesn’t matter which party owns the white house.”

On election day, Nasdaq Composite rose 1.4% to close at 18,439 and is now within 1.5% of its Oct. 29 record high. The S&P 500 increased by 1.2% to 5,782, and the Dow Jones Industrial Average added 1% to 42,221.

We continue to monitor developments in relation to your portfolio and your pocket our live election blog.

Services rise as factories collapse

The Institute for Supply Management (ISM) reported Tuesday morning that the ISM services purchasing managers’ index (PMI) expanded to 56.0 in October from 54.9 in September. It is the highest reading for the ISM PMI since July 2022 and the fourth consecutive month of expansion. Economists were looking for the indicator to reach only 53.7 in October.

Service sectors, including retailers and restaurants, account for most economic activity in the US. October’s expansion was driven by a rebound in the employment component of the index. The employment index rose for the third time in four months. At 53.0, the indicator has firmly entered expansion mode from a contraction reading below 50.0 in September.

“The development allays concerns over last Friday’s high non-agricultural wage rate and sending the crops to the north”, he observes Interactive brokers Senior Economist José Torres.

The data also highlights a widening gap between services and manufacturing. The ISM said last week that manufacturing PMI fell from 47.2 in September to 46.5 in October, the lowest reading in more than a year, as declines in output and current inventories offset a slight increase in new orders .

“Regardless of the outcome of today’s election, the next president will inherit an economy in which service sector activity remains firmly expanding even as manufacturing struggles,” it writes. Wells Fargo economists Tim Quinlan and Shannon Seery Grein in a note to clients.

ISM readings are also a consideration for the Federal Reserve: “No doubt policymakers are aware that the hurricanes that have ravaged the southeastern United States are likely to disrupt economic data as well,” Quinlan and Grein add. “The challenge now is to try to ride out the volatility and the storm. Whatever the temporary effects, the glaring gap between manufacturing and services complicates the Fed’s efforts to control inflation without causing disproportionate pain to the factory sector.”

The the next Fed meeting concludes Thursday afternoon with a policy statement followed by a press conference with Fed Chair Jerome Powell.

Palantir rises to the demand of AI

Palantir Technologies (PLTR) gained 23.5% to $51.15, its biggest percentage gain since Feb. 6 and a new all-time high. The rally was sparked by a beat-and-raise quarter from mega-cap tech stocks.

“We absolutely gutted this quarter, driven by relentless demand for AI that won’t slow down,” Palantir CEO Alex Karp said. “This is a US-led AI revolution that has taken full hold. The world will be divided between those who have artificial intelligence and those who do not have artificial intelligence. At Palantir, we’re all about powering winners.”

Palantir reported a 30% rise in revenue for the three months ended June 30 to $725.5 million, ahead of an average forecast of $705 million. Adjusted earnings per share (EPS) came in at 10 cents to beat analysts’ expectations by a penny.

Palantir now expects 2024 revenue of $2.805 billion to $2.809 billion, up from a previous range of $2.742 billion to $2.750 billion.

PLTR — which said revenue from U.S. government contracts rose 40 percent and now accounts for more than 44 percent of its total sales — was the best-performing stock in the S&P 500 on Election Day.

Palantir stock was recently added to the S&P 500but analyst questions about the valuation could become stronger based on recent price action.

Trump stocks in motion

Trump Media & Technology Group (DJT) rose early and rose by double digits before closing to finish down 0.4% on Tuesday after surging 12.4% on Monday, with a final set of survey data continuing to show another presidential race too close to call.

DJT shares have traded erratically in recent monthsas interest and anxiety around election day causes more volatility.

No analysts cover DJT. But in a March 26 note, Interactive Brokers chief strategist Steve Sosnick wrote of “political motivations driving the stock” and noted “that the company’s most devoted investors viewed it as a call option about the MAGA movement”.

In August, Trump Media & Technology reported a net loss of $16.4 million and income of $837,000. Management noted that it has $344 million in cash on its balance sheet and no debt.