On Monday, Wall Street’s primary indexes displayed a mixed performance while hovering close to record peaks, as Tesla experienced a significant increase ahead of an expected release of economic data that may impact the Federal Reserve’s approach to interest rate reductions.
A number of stocks contributed to the profits they have accrued since Republican Donald Trump’s election victory, with traders anticipating their advantages stemming from his potential return to the presidency.
Tesla surged nearly 9%, reaching a market capitalization of $1.1 trillion, driven by projections that the automaker will gain from CEO Elon Musk’s strong connections with Trump.
By mid-afternoon, traders had exchanged over $56 billion in Tesla shares, comprising one-fourth of all transactions involving S&P 500 firms, based on data from LSEG.
The financial index of the S&P 500 surged 1.5%, with support from banks propelling the Dow Jones Industrial Average to a new record.
The small-cap Russell 2000 climbed 1.5% to its highest point since November 2021, approaching a record high.
Smaller companies are perceived as likely beneficiaries of Trump’s proposed tax reforms and anticipated relaxed regulations.
Stocks from Microsoft, Amazon, and Meta Platforms each faced a decline of nearly 1%.
The S&P 500 has gained approximately 4% since Trump’s victory was announced last Tuesday, while the Nasdaq has seen an almost 5% increase.
“The past four days have been quite eventful since the election, and the market is taking a moment to stabilize,” remarked Jake Dollarhide, CEO of Longbow Asset Management in Tulsa, Oklahoma. “Nonetheless, the general trend is upward. It’s not surprising to think that the Trump rally may lead into a Santa Claus rally.”
The Nasdaq retreated after establishing a record high during the session. The information technology index of the S&P 500 fell 1.2%, while the PHLX chip index dropped 3.3%, with AI leader Nvidia declining nearly 2%.
The S&P 500 stood at 0.09% higher, reaching 6,000.68 points.
The Nasdaq was down 0.06% at 19,274.65 points, and the Dow Jones Industrial Average rose 0.76% to 44,322.01 points.
Cryptocurrency stocks surged as bitcoin surpassed a historic $84,000. Coinbase Global increased by 22%, while bitcoin miners MARA Holdings and Riot Platforms saw gains of 29% and 20%, respectively.
Investors are closely monitoring consumer price inflation data set to be released on Wednesday, along with a host of other significant indicators this week that could provide insight into the economy and monetary policy direction.
Last week, the U.S. Federal Reserve reduced interest rates by 25 basis points, and interest rate futures suggest that traders anticipate a 65% probability of an additional 25 basis point cut at the central bank’s December meeting, according to CME FedWatch.
“With policymakers already mindful of the risk of renewed inflationary pressures, especially in light of the persistent strength of the U.S. economy, the Fed must navigate a careful path,” cautioned Seema Shah, chief global strategist at Principal Asset Management.
Within the S&P 500, advancing stocks outnumbered those declining by a ratio of 2.1-to-one.
The S&P 500 recorded 116 new highs and seven new lows; the Nasdaq logged 344 new highs and 68 new lows.
Investors are increasingly contemplating what potential Republican governance could signify for stocks, bonds, and currencies, even as the initial intense market reactions to Donald Trump’s presidential win begin to stabilize.
A scenario where Republicans have total control, including the presidency and both chambers of Congress, could facilitate Trump in executing his economic initiatives with greater ease. Many of these initiatives, like tax reductions, are perceived as conducive to growth but might also elevate inflation concerns.
As election officials continued to count the final votes that will dictate control of the U.S. House of Representatives, Republicans maintained a slim advantage on Friday, despite Democrats managing to flip a couple of seats in New York.
“Given that many of Trump’s policies are designed to bolster stocks, particularly those of smaller companies, markets are likely to react positively to a complete Republican takeover,” asserted JJ Kinahan, CEO of IG North America and president of the online brokerage Tastytrade.
The anticipation that such policies will be pursued under Trump to some extent has contributed to lifting parts of the stock market, strengthening the dollar, and placing downward pressure on Treasuries, as investors reassess their portfolios for enhanced growth, relaxed regulations, and the prospect that inflation fears may prevent the Federal Reserve from making substantial rate cuts next year.
A significant development has been observed in small-cap stocks, with the Russell 2000 index rising roughly 8% this week.
Although some of these movements have slowed in recent days, investors are still considering how Trump’s policies might impact markets and the economy in the long run, particularly under a fully Republican-controlled scenario.
Trump has vowed to reduce federal regulations he believes inhibit job creation. He has asserted his commitment to maintain a tax cut enacted in 2017 during his presidency, and discussions have emerged within Trump’s economic team regarding a further wave of individual and corporate tax reductions beyond those initiated in his first term.
Goldman Sachs strategists indicated that their earnings per share projections for the S&P 500 could rise by approximately 4% if Trump were to lower the domestic corporate tax rate from 21% to 15%.
Analysts at Deutsche Bank stated they would elevate their 2025 U.S. growth forecast to 2.5-2.75% from 2.2% in the event of a Republican sweep. Nevertheless, they anticipate a decrease in their 2026 growth forecast due to expected economic uncertainties stemming from an escalating trade conflict.
