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* Banks, construction companies rise before the bell
* Arista climbs as profit tops estimates
* PayPal down as earnings target falls short of expectations
* Indexes up: Dow 2.06%, S&P 1.74%, Nasdaq 1.57% (Updates to market open)
Nov 3 (Reuters) - U.S. stocks jumped on Tuesday as investors bet that one of the country’s most divisive presidential races would end with a clear victory for Democratic nominee Joe Biden and a swift deal on more fiscal stimulus.
All 11 major S&P indexes were up in early trading, led by financial, healthcare and industrial stocks.
The consistent lead for Biden in national opinion polls has raised hopes of a decisive outcome in Tuesday’s election as well as a bigger stimulus package post-election, analysts and portfolio managers said, even as both campaigns are preparing for post-election disputes.
“Markets are expecting not only a clear Biden victory but also a policy reaction that is quite reflationary and one that will come with more fiscal spending,” said Chris Bailey, Raymond James strategist in London.
Democrats are also favored to emerge from 14 hotly contested U.S. Senate races with full control of Congress in Tuesday’s election, although final results from at least five of those contests may not be available for days, and in some cases, months.
Still, the competition in swing states is seen as close enough that President Donald Trump could piece together the 270 Electoral College votes he needs to stay in the White House for another four years.
Despite a coronavirus-driven crash earlier this year, the S&P 500 has risen about 55% since Trump clinched an upset victory in 2016 as lower tax rates under his administration boosted corporate profits.
The CBOE volatility index, known as investors’ fear gauge, retreated for a second day after touching a 20-week high last week on surging coronavirus cases globally.
Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh, said a Biden victory could lead to some inflation, which would be beneficial to banks in particular.
“A Federal Reserve committed to keeping rates lower and yet allowing not a flat curve but one with some steepening to it, and then some inflation and you get yourself a hip hip hooray for banks.”
The S&P banking subindex surged 2.6% to its highest in more than a week, while industrials Caterpillar Inc and Honeywell International Inc rose about 2% each.
By 10:11 a.m. ET, the Dow Jones Industrial Average was up 553.70 points, or 2.06%, at 27,478.75, the S&P 500 was up 57.67 points, or 1.74%, at 3,367.91, and the Nasdaq Composite was up 171.87 points, or 1.57%, at 11,129.49.
Technology and communication services stocks, which powered Wall Street’s rally from the coronavirus-driven slump in March, were among the smallest gainers.
Arista Networks Inc jumped 18.6%, among the leading gainers on the benchmark S&P 500, after the network-gear maker reported a better-than-expected quarterly profit.
PayPal Holdings Inc reported better-than-expected quarterly results, boosted by a surge in digital payments. However, its shares dropped 3.1% after more than doubling in value since March.
Advancing issues outnumbered decliners 7.52-to-1 on the NYSE and 5.34-to-1 on the Nasdaq.
The S&P index recorded 14 new 52-week highs and no new low, while the Nasdaq recorded 33 new highs and 11 new lows.
Reporting by Medha Singh in Bengaluru; additional reporting by Sruthi Shankar, Susan Mathew and Noor Zainab Hussain; Editing by Sagarika Jaisinghani and Anil D’Silva
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