Wall St gains as investors reassess presidential race after Biden exit

By Ankika Biswas and David French

(Reuters) -Wall Street’s three benchmarks advanced on Monday, as investors reexamined the state of the presidential race after U.S. President Joe Biden said he would not pursue a second term.

The upward swing helped both the and recover some of the losses suffered the previous week, when selling of megacap growth stocks and the global tech outage had contributed to their worst weekly performance since April.

The was also back in positive territory, set to break a two-session skid since hitting an all-time closing high last Wednesday.

Biden announced his withdrawal and endorsed Vice President Kamala Harris’ candidature for the November election on Sunday. Online betting site PredictIt showed pricing for a Donald Trump victory slipped 4 cents, to 60 cents, while climbing 12 cents for a Harris win, to 39 cents.

Among those rising on Monday were the megacaps which had weighed heavy during the previous week’s declines. Alphabet (NASDAQ:), Meta Platforms (NASDAQ:) and Tesla (NASDAQ:) gained between 2.4% and 5.2%.

Nvidia (NASDAQ:) also rose 4.3%, after Reuters reported the artificial intelligence chip leader was working on a version of its new flagship AI chips for the China market that would be compliant with current U.S. export controls.

The Information Technology index topped sectoral gainers and was on track to snap a four-day losing streak.

As of 1:57 p.m. ET, the S&P 500 rose 56.49 points, or 1.03%, to 5,561.49 points, while the Nasdaq Composite gained 271.12 points, or 1.53%, at 17,998.06. The Dow Jones Industrial Average rose 102.18 points, or 0.25%, to 40,389.71.

Trump-linked stocks were mixed, with Trump Media & Technology Group dropping 1.4%, while software firm Phunware gained 2.2%.

Biden’s exit could prompt investors to unwind trades on bets that a victory for Republican Trump would increase U.S. fiscal and inflationary pressures. But some analysts said markets could benefit from an increased chance of a divided government under the next administration.

“Trump still has the lead, but everybody is also waiting to see who Harris will select for her running mate, which adds uncertainty, but also a little bit of excitement to the campaign,” said Sam Stovall, chief investment strategist, CFRA Research.

The question of who will be on the Democratic presidential ticket compounds investor unease ahead of quarterly earnings, including from two of the so-called Magnificent Seven companies – Alphabet and Tesla.

The results will test whether the recent rally in top-tier high-momentum stocks is tenable and if a move to underperforming sectors will continue. The small-cap gained 0.9%.

“There is an awful lot of underperformance in the small-cap stocks that investors can take advantage of. … They are very inexpensive by historic measures,” Stovall said.

Crucial economic data including the Personal Consumption Expenditures Price Index – the Federal Reserve’s preferred inflation gauge, which is expected to shed light on the monetary policy outlook – is due through the week.

Traders have broadly priced in a 25-basis-point rate cut by September and two cuts by the year-end, according to LSEG and CME’s FedWatch data.

Cybersecurity firm CrowdStrike (NASDAQ:) slumped 12.8%, set to extend losses after a software update from the company sparked Friday’s global tech outage.

Delta Air Lines (NYSE:) lost 2% after canceling over 600 flights as it struggled to restore operations after the outage.

Verizon Communications (NYSE:) fell 6.2% after a second-quarter revenue miss.

Mattel Inc (NASDAQ:) jumped 16% after Reuters reported the toy maker had been approached by buyout firm L Catterton with an acquisition offer.