NEW YORK (AP) — The U.S. stock market, Elon Musk’s Tesla, banks and bitcoin are all storming higher Wednesday as investors bet on what Donald Trump’s return to the White House will mean for the economy and world. Among the losers the market sees: solar-power companies and potentially anyone worried about higher inflation.
The S&P 500 was jumping by 2.2% in afternoon trading and on track to top its all-time high set last month. The Dow Jones Industrial Average was up 1,382 points, or 3.3%, as of 12:59 p.m. Eastern time, while the Nasdaq composite was 2.5% higher.
The U.S. stock market has historically tended to rise regardless of which party wins the White House, with Democrats scoring bigger average gains since 1945. But Republican control could mean big shifts in the winners and losers underneath the surface, and investors are adding to bets built earlier on what the higher tariffs, lower tax rates and lighter regulation that Trump favors will mean.
“The markets are scrambling to figure out what happens next, but for the time being, the market is pricing in a higher growth and higher inflation outlook,” Peter Esho of Esho Capital said.
Of course, how much change Trump will be able to effect will likely depend on whether his fellow Republicans win control of Congress, and that’s still to be determined. That could leave room for snaps back in some of Wednesday’s big knee-jerk movements.
Nevertheless, the market is cleaving between rather clear winners and losers following Trump’s dramatic win. Among them:
Bank stocks, UP
Bank stocks led the market higher, in part on hopes that a stronger economy would mean more customers getting loans and paying them back with interest. They also rallied on hopes for lighter regulation from a Republican White House, which could spur more mergers and buyouts where investment banks could earn fees. JPMorgan Chase rose 10.8%, and financial stocks in the S&P 500 had the biggest gain by far among the index’s 11 sectors.
Crypto, UP
Trump has pledged to make the country “the crypto capital of the planet” and create a “strategic reserve” of bitcoin. The price of bitcoin hit an all-time high above $75,000, according to Coindesk, and was recently up 6.4% at roughly $74,670. Companies in the crypto industry also jumped, including trading platform Coinbase’s 26.5% leap.
Tesla, UP
Musk has become a close ally of Trump, exhorting the former president’s run. While Trump may end up hurting the electric-vehicle industry broadly by limiting government subsidies, analysts say Tesla could gain somewhat of an advantage by already being such a big player in the industry. Tesla revved 14.1% higher, while rival Rivian Automotive fell 10.1%.
Trump Media & Technology Group, UP
The company behind Trump's Truth Social platform rose 6.7% after earlier jumping nearly 35%. It regularly trades more on Trump's popularity than on prospects for its profits. Its rise came even after it filed unaudited financial documents with regulators late Tuesday saying it lost $19.2 million during the latest quarter and that its sales weakened from a year earlier.
Private-prison operators, UP
A Trump-led Washington could push for tougher enforcement of the nation's borders, which could mean more business for companies that work with U.S. Immigration and Customs Enforcement, or ICE. GEO Group, which runs ICE processing centers, jumped 38.4%.
Stocks of smaller companies, UP
Trump's America-First policies could help companies that focus on customers within the United States, rather than big multinationals who could be hurt by increased tariffs and protectionism. The Russell 2000 index of smaller stocks, which are seen as more domestically focused than the big stocks in the S&P 500, jumped 5.2%. That was more than double the S&P 500's gain.
Treasury bond prices, DOWN
Investors see Trump’s policies potentially leading to stronger economic growth, which helps push prices down for Treasurys and their yields up. Tax cuts under Trump could also further swell the U.S. government’s deficit, which would increase its borrowing needs and force yields even higher. The yield on the 10-year Treasury jumped to 4.43% from 4.29% late Tuesday, which is a major move for the bond market. It’s up substantially from August, when it was below 4%.
Inflation worries, UP
Investors also see Trump's policies likely adding to future inflation, particularly tariffs, which can add costs to U.S. households' bills.
“Trump keeps openly telling people that he will increase tariffs not just on China but with every trade partner," said Andrzej Skiba, head of BlueBay U.S. Fixed Income at RBC Global Asset Management. "We’re talking 10% tariffs across all global partners. This is a big deal because this could add 1% to inflation. If you add 1% to next year’s inflation numbers, we should say bye to rate cuts.”
A drop-off in immigration could also push companies to raise wages for workers faster, which in turn could put more upward pressure on inflation.
Expectations for interest rate cuts, MUDDLED
Much of Wall Street's run to records this year was built on expectations for coming cuts to interest rates by the Federal Reserve, now that inflation seems to be heading back down to its 2% target. Easier interest rates help to boost the economy, but they can also give inflation more fuel.
The Fed will announce its latest decision on interest rates on Thursday, where the expectation is still for a cut, according to data from CME Group. But traders are already paring back their forecasts for how many cuts the Fed will provide through the middle of next year.
Foreign currencies, DOWN against the dollar
Trump has vowed to sharply hike tariffs on imports from China, Mexico and other countries, raising worries about trade wars and disruptions to the global economy. A measure of the U.S. dollar's value against several major currencies climbed 1.6%, which means that those other currencies fell.
The euro sank 1.8%, the South Korean won fell 1.5% and the Mexican peso slipped a bit further against the dollar.
Rewnewable energy stocks, DOWN
Trump is a fan of fossil fuels, encouraging production of oil and natural gas. His win sent solar stocks sharply lower, including a 10.4% fall for First Solar and 17% slide for Enphase Energy.
The only stock with a bigger loss in the S&P 500 was Super Micro Computer, which said its sales for the latest quarter could come in below its prior forecast. Its stock sank 23.1%.
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AP Writers Zimo Zhong, Elaine Kurtenbah, Kirstin Grieshaber and Kelvin Chan contributed to this report.
Stan Choe, The Associated Press