US stock futures tumble on fears of a contested election
(CNN) -- US stock futures sold off sharply early Wednesday as the prospects of a quick, decisive result to the presidential election faded, leaving investors on edge about the outcome.
Dow futures dropped 1.5%, or more than 400 points, at 3 a.m. ET after swinging between gains and losses late Tuesday. S&P 500 futures were down 1%. Nasdaq futures, which had surged as much as 3% earlier, were up just 0.5%
Uncertainty is the enemy of markets. Investors had hoped that early results would point to a clear winner sooner rather than later, avoiding the nightmare scenario of a contested election.
Several key races remained too early, however, including Arizona, Pennsylvania, Wisconsin and Michigan. In some places, it could take days to count all the votes.
Speaking at the White House early Wednesday, President Donald Trump attacked legitimate vote-counting efforts, suggesting attempts to tally all ballots amounted to disenfranchising his supporters. He also said he had been preparing to declare victory earlier in the evening, and baselessly claimed a fraud was being committed.
"This is a fraud on the American public. This is an embarrassment to our country," Trump claimed, adding he would go to the US Supreme Court.
"When there's been a heightened chance of a contested election, that's when volatility has picked up," Charles Schwab chief investment strategist Liz Ann Sonders told CNN Business.
Investors had bet that former Vice President Joe Biden would emerge victorious. But riskier assets like stocks are expected to rally regardless once the uncertainty lifts and it becomes clear how power will be divided in Washington.
David Joy, chief market strategist at Ameriprise, said the Nasdaq gains could reflect the view that many big tech firms and other stocks that benefit from rapid growth would do better under Trump than stocks that get a boost from a general strengthening of the economy.
Still,strategists are cautioning against drawing early conclusions.
"The night is young," Sonders said.
In Asia, stock markets were generally higher, although Chinese indexes remained muted after the shock suspension of Ant Group's giant IPO Tuesday left investors dazed. Japan's Nikkei 225 finished up 1.7%, while South Korea's Kospi rose a more moderate 0.6%. The Shanghai Composite rose 0.2% and Hong Kong's Hang Seng Index shed 0.2%.
European markets opened lower, with France's CAC 40 and Germany's Dax both down more than 1%.
The US dollar ticked up 0.5% against a basket of top currencies, while demand for benchmark 10-year US Treasuries rose, sending yields lower.
US stocks posted strong gains during regular trading hours on Election Day. Hopes that a Biden win would unleash more government spending to help the economic recovery have boosted stocks this week.
The Dow closed up 555 points, or 2.1%, higher, its best percentage gain since mid-July. The S&P 500 closed 1.8% higher, its best day in a month. The Nasdaq Composite finished 1.9% higher — its best performance since mid-October.
Investors are also closely watching the results in the race for control of the US Senate. If Democrats appear to win the majority of seats, that could pave the way to bigger fiscal stimulus and infrastructure spending — two things markets crave. However, it could also lead to higher taxes that would cut into corporate profits.
Looking ahead, the Federal Reserve meets Wednesday, though the central bank will not make any announcements about policy until Thursday.
— CNN's Matt Egan and Anneken Tappe contributed to this report.
The-CNN-Wire™ & © 2020 Cable News Network, Inc., a WarnerMedia Company. All rights reserved.
