Markets surge as Washington gridlock becomes likelier with potential Biden win

The U.S. stock indexes were buoyed on Wednesday, apparently responding to the increasing possibility of a Washington gridlock created by a potential Democratic White House and Republican Senate.

The idea is that "gridlock can be good for stocks because it lowers the chances of sweeping policy changes, such as tax increases, that might hurt profits," The New York Times reports. The S&P 500 ended 2.2 percent higher in what was its biggest increase since June, and the tech-heavy NASDAQ-100 closed 3.9 percent higher in its biggest increase since April. The Dow Jones Industrial Average also rose 367, or 1.3 percent:

While the potential for gridlock might assure stability, "those developments also throw a wrench into an easy pathway for additional fiscal stimulus that some analysts say is needed to help the economy recover from the damage wrought by the coronavirus pandemic," The Wall Street Journal adds, noting that "investors appeared to back off from buying shares of economically sensitive companies, the 'blue-wave trade' that had been gaining traction ahead of the election on the expectation of another round of economic aid. Instead, investors reverted back to snapping up the stock market's most enduring winners, shares of technology companies."

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Analysts further warned that the rally — which was in its third day on Wednesday — would likely only last so long. "At this point, we've got a couple days' good grace with the market — but we need a winner fairly soon or it's going to upset the apple cart," Ryan Detrick, the chief market strategist at LPL Financial, told the Times.