Stock futures remained relatively unchanged on the evening of November 6, 2024, following a significant market rally triggered by Donald Trump’s decisive win in the presidential election.
The election results sparked a remarkable surge in the stock market, with the Dow soaring over 1,500 points, marking new all-time highs for the Dow, S&P 500, and Nasdaq Composite. The small-cap Russell 2000 index experienced a notable increase of more than 5%. In addition to equities, Bitcoin, the U.S. dollar, and bank stocks saw significant gains, reflecting a broader optimism in the financial markets. However, some sectors, particularly international funds and solar stocks, faced challenges as investors anticipated that the incoming administration's policies could negatively impact these areas.
Scott Helfstein, head of investment strategy at Global X ETFs, commented on the market's reaction, noting that the financial markets can now operate with less anxiety over a prolonged election process. He emphasized the importance of maintaining a cautious approach to geopolitical news, which can lead to substantial fluctuations in asset prices. Despite the immediate post-election rally, Helfstein suggested that fundamental economic factors would ultimately prevail over time.
As market participants prepare for the Federal Reserve's interest rate decision, expectations are high for a potential cut in borrowing costs. Current pricing from CME Group’s Fed Watch tool indicates a 100% likelihood that the central bank will lower rates at this meeting, marking the second consecutive cut following a decrease in September. The fed funds rate currently sits between 4.75% and 5.0%, and traders are closely monitoring economic data, including jobless claims and wholesale inventories, ahead of the announcement.
In addition to the Fed's decision, quarterly earnings reports from major companies are set to influence market dynamics. Moderna and Warner Bros. Discovery are scheduled to release their results before the market opens on Thursday, while Block, Pinterest, and Rivian will report in the afternoon. These earnings announcements are expected to provide further insights into the health of various sectors and could impact investor sentiment in the wake of the election.
The recent election results have also affected expectations regarding the Federal Reserve's future rate cuts. Following Trump's victory, Treasury yields have risen, leading to a reassessment of how aggressively the Fed may pursue rate cuts in the coming months. Currently, market pricing suggests a 71% chance of another quarter-point cut in December, a slight decrease from previous days. Conversely, the likelihood of a rate cut in January has diminished, with a growing probability that the Fed may opt to maintain current rates during that month.
In extended trading, several stocks have made notable moves following the election results and earnings reports. Lyft, the ride-hailing company, saw its shares surge nearly 20% after reporting third-quarter revenue of $1.52 billion, surpassing consensus estimates. The company also provided optimistic guidance for the fourth quarter, forecasting bookings between $4.28 billion and $4.35 billion, exceeding analyst expectations.
On the other hand, SolarEdge Technologies, a manufacturer of residential solar power inverters, experienced a sharp decline of 18% after its third-quarter revenue fell short of market expectations. Meanwhile, E.l.f Beauty, a cosmetics retailer, saw its stock rise by 11% following a stronger-than-expected quarterly report and an upward revision of its guidance.
As the market digests the implications of the election results and prepares for the Federal Reserve's decision, investors remain vigilant, balancing optimism with caution in a rapidly changing economic landscape. The interplay between political developments, monetary policy, and corporate earnings will continue to shape market dynamics in the coming days and weeks.