Stock Futures Pare Losses as Trump Wins White House
It was an election night Wall Street didn’t expect.
U.S. equity futures plunged on election night, but pared losses in the wee hours of Wednesday morning after Fox News projected Republican nominee Donald Trump won the White House, bringing the 2016 campaign to a close. Trump led the race in electoral votes through the night, taking key battleground states of North Carolina, Ohio and Florida. Pennsylvania was the final state that tipped the race into Trump’s hands, bringing his electoral count above the 270 needed to clinch the presidency.
With Trump looking to emerge victorious throughout the night, traders rushed to reassess the outcome of the vote, and its impact on financial markets. They piled into safe havens like gold and government debt. The precious metal rallied as much as 4.68%, while the yield on the benchmark 10-year U.S. Treasury bond, which moves inversely to its price, declined 0.137 percentage points to 1.73%.
Meanwhile, the Mexican peso plunged 11.54%, its lowest-ever level against the U.S. dollar. The currency has been seen as Wall Street’s favorite proxy for betting on the presidential race during the 2016 election cycle. As Republican nominee Donald Trump’s prospects of winning looked better, especially with the tight race in Florida – a state he needs to carry, the peso dropped.
Dow futures plunged nearly 800 points during the night’s volatile trade, while S&P 500 and Nasdaq 100 futures fell sharply in sympathy. As of 7:45 a.m. on Wednesday (1145 GMT), S&P 500 e-minis were down 32.75 points, or 1.53 percent, with 2,256,567 contracts changing hands. Nasdaq 100 e-minis were down 93.75 points, or 1.95 percent, in volume of 279,569 contracts. Dow e-minis were down 279 points, or 1.53 percent, with 341,709 contracts changing hands.
Still, the night’s action threatened to wipe out 2016 gains on both the S&P and Nasdaq at the opening bell on Wednesday. Crude prices followed equity futures lower as West Texas Intermediate prices dropped as much as 3.80% to around $43 per barrel, and Brent followed suit, shedding 3.32% to $44 a barrel.
Stock markets in Asia and Europe also moved solidly lower as traders around the world kept a keen eye on the future of the U.S. political landscape. In short, the election’s outcome had traders around the globe scrambling for cover, said Peter Kenny, senior market strategist at Global Markets Advisory Group.
“His potential presidency brings with it many variable not yet priced into the economic narrative from trade, to trade pacts, to multi-national economic agreements, and mutual defense agreements,” he explained.
The sharp moves forced investors to reverse a Clinton victory that had been priced in early in the week. On Monday, U.S. stocks boomed higher, snapping nine-straight days of losses after FBI Director James Comey said the bureau would not pursue criminal charges against Clinton related to ongoing controversy around her use of a private email server. During the regular trading session Tuesday as voters headed to the polls to cast their ballots, Wall Street extended those Monday gains, sending stocks moderately higher by the close of trade.
The market’s overall reaction and volatile swings are reminiscent of the frantic action seen back in June following the so-called Brexit referendum in the U.K. when voters there decided to sever their nation’s 40-year membership in the European Union. In response, financial markets, which had priced in a “remain” vote, rushed into safe havens as uncertainty reigned about the future of the country’s direction and long-term trade deals.
A similar pattern played out in the U.S. on Election Night.
“It seems remarkable that we are watching this unfold just a few short months after Brexit,” said IG chief market analyst Chris Beauchamp. “Once again, the cat has been set amongst the pigeons. Clinton’s path to the White House, so assured just a few hours ago, now looks to be a dead end.”
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