U.S. stocks rallied on Wednesday, in a dramatic rebound from overnight losses fueled by the stunning victory of Republican Donald Trump as investors snapped up stocks in sectors that appeared poised to benefit from the policies of a Trump presidency.
Markets oscillated between gains and losses in choppy morning trade. At midday, each of the three major stock indexes were up and near session highs in the wake of Trump's win.
Gains of 3 percent each in the heavily weighted healthcare .SPXHC and financials .SPSY sectors pushed indexes higher. Bond proxy sectors such as real estate .SPLRCR, down 2.2 percent, and utilities .SPLRCU, off nearly 3 percent, were the worst performers.
"At this point it is almost a Rorschach picture. If you want to be positive you can say at face value his policies are reflationary and less regulation," said David Lefkowitz, senior equity strategist at UBS Wealth Management Americas in New York.
"The sectors that benefit from that would be in terms of reflation, it is going to be financials, and less regulation it is going to be healthcare and financials."
Reflation policies are intended to increase economic output by lowering taxes and boosting spending.
A curb on drug pricing was a key campaign theme for Democratic nominee Hillary Clinton, while Trump has called for repealing the Affordable Care Act and loosening restrictions on banks enacted after the financial crisis.
The Dow Jones industrial average .DJI rose 159.5 points, or 0.87 percent, to 18,492.24, the S&P 500 .SPX gained 16.55 points, or 0.77 percent, to 2,156.11, and the Nasdaq Composite .IXIC added 33.81 points, or 0.65 percent, to 5,227.30.
Through the night, financial markets reacted violently to the election results and as Clinton's path to victory narrowed. The S&P futures ESc1 slid 5 percent and hit a limit down, meaning the contract could not trade lower, only sideways or up. Dow Industrials futures briefly fell 800 points.
Republicans maintained their majorities in both chambers of the U.S. Congress, potentially enabling the party to reshape Washington with two years of "unified" government.
"The markets were also not pricing in a Republican sweep, but now the victory makes you think maybe something can get done and the Republicans historically are against governments meddling in businesses, and that's what you seeing played out today," said Nadia Lovell, US Equity Strategist at J.P. Morgan Private Bank in New York.
Wall Street is typically seen as preferring gridlock, or shared control of the White House and Congress, than a sweep of both chambers of Congress and the presidency.
CBOE Volatility index futures VXc1 shot nearly 40 percent higher at one point, reflecting investors' reservations about a Trump presidency, but sharply retraced the advance after Trump's acceptance speech. During the session the CBOE Volatility index .VIX was down 16.7 percent, on track for its biggest daily drop since late June.
Big pharmaceutical shares gained, with Pfizer (PFE.N) jumping 7.6 percent to $32.29 as the biggest boost to the S&P 500. The iShares Nasdaq Biotechnology ETF (IBB.O) surged 7.6 percent and was on track for its biggest daily percentage gain in eight years.
Among financials, JPMorgan Chase (JPM.N) shot up 4.7 percent to $73.29, on pace for its best day in eight months, while Wells Fargo rose 5 percent to $47.81.
(Additional reporting by Rodrigo Campos and Tanya Agrawal and Yashaswini Swamynathan; Editing by Chizu Nomiyama, Meredith Mazzilli and Jeffrey Benkoe.)