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US STOCKS-Wall St rallies on likelihood of divided U.S. Congress, Fed stands pat

(For a Reuters live blog on U.S., UK and European stock markets, click LIVE/ or type LIVE/ in a news window)

* Tech rally resumes as investors see U.S. policy gridlock

* Qualcomm surges after results

* Fed reiterates “whatever it takes” policy (New throughout, updates prices, market activity and comments, adds Fed statement; new byline, adds NEW YORK dateline)

NEW YORK, Nov 5 (Reuters) - U.S. stocks jumped on Thursday as investors bet that Republicans would retain control of the Senate and block any major policy changes under a possible Joe Biden White House that could dampen corporate profits.

With votes still being counted in battleground states, investors were abandoning cautious pre-election positioning, driving all of Wall Street’s main indexes up for a fourth straight session.

While a fiscal stimulus package is now widely expected, the size of any deal reached in a divided Congress is likely to be much smaller than anticipated. This in turn will pressure the U.S. Federal Reserve to pump more funds into the financial system, supporting more buying of stocks.

Stocks got a brief additional boost from the Fed’s statement on Thursday. The central bank kept its loose monetary policy intact and again pledged to do whatever it can to sustain an economy severely damaged by the coronavirus pandemic.

Biden was edging closer to victory after winning Michigan and Wisconsin, but his Democratic party appeared unlikely to win the Senate. This eased investor worries about tighter regulations on Big Tech and a corporate tax hike.

“Long live the rally, it works for me but in some ways investors may be setting themselves up for some disappointment here along the margins,” said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.

“Things are never as good or as bad as they seem, but markets seem to be rallying pretty strongly in this post-election environment.”

Arone cautioned that it was not yet certain that Congress will remain split, so there is a slim chance markets could be in for a shock.

The Dow Jones Industrial Average rose 575.05 points, or 2.06%, to 28,422.71, the S&P 500 gained 77.76 points, or 2.26%, to 3,521.2 and the Nasdaq Composite added 310.07 points, or 2.68%, to 11,900.85.

The tech-heavy Nasdaq, packed with “stay-at-home” corporate winners under this year’s lockdowns, gained over 2% and was within striking distance of its Sept. 2 record closing high.

The Philadelphia SE semiconductor index surged 4.38% to hit an all-time high, while technology and communication services led gainers among S&P indexes.

All 11 of the major S&P 500 sectors moved higher in a broad rally, and the VIX volatility index, which has risen in recent months as investors feared the vote might spark falls in shares, retreated to its lowest in three weeks.

The materials index also touched a record, boosted by a 6.55% rise in shares of U.S.-German industrial gas producer Linde.

Qualcomm Inc surged 13.08% after the chipmaker forecast fiscal first-quarter revenue above estimates as it predicted solid growth in 5G smart phones sales next year.

Advancing issues outnumbered declining ones on the NYSE by a 4.93-to-1 ratio; on Nasdaq, a 3.23-to-1 ratio favored advancers.

The S&P 500 posted 72 new 52-week highs and no new lows; the Nasdaq Composite recorded 149 new highs and 19 new lows.

Reporting by Chuck Mikolajczak; Editing by David Gregorio