Futures tracking the Nasdaq 100 index sank 2% on Wednesday. Consequently, investors priced in the prospect of a Democrat-controlled Senate. Moreover, it could lead to tighter regulations on technology mega-caps.
Democratic challenger Raphael Warnock won a contested Senate race over Republican incumbent Kelly Loeffler in Georgia. TV networks and Edison Research projected this.
Moreover, the race between Democrat Jon Ossoff and Republican David Perdue was still too close to call.
They call “blue wave” to give President-elect Joe Biden more scope to act on his reform plans. These include the new COVID-19 stimulus.
It could also mean higher corporate taxes and more regulations on the technology behemoths that helped Wall Street to recover. Wall Street suffered from a coronavirus-driven crash last year.
They see some sell-off in Nasdaq because that is where the outright war is going to come. However, that is in terms of what the Democrats have said about breaking up big tech. This was a statement from Keith Temperton, an equity sales trader at Forte Securities.
Stocks on the Move
Shares of Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Amazon.com (NASDAQ:AMZN), and Google-parent Alphabet (NASDAQ:GOOGL) declined. They fell between 1.9% and 2.4% in early premarket trading. The only major technology stock trading higher was Tesla (NASDAQ:TSLA).
S&P 500 e-minis were down 18 points, or 0.48% by 4:26 a.m. ET. Nasdaq 100 e-minis fell 242.25 points, or 1.89%.
Moreover, Dow e-minis were nearly flat. Stimulus bets propped up shares of industrial bellwethers Caterpillar Inc (NYSE:CAT) and 3M Co. Futures tracking the small-cap Russell 2000 index climbed 1.3%.
Vasu Menon, investment strategy executive director at OCBC Bank, Singapore, said a ‘blue wave’ might not be a bad outcome. Decisive fiscal action will help to speed up economic recovery.
Shares of JPMorgan Chase & Co (NYSE:JPM), Citigroup Inc (NYSE:C), and Bank of America Corp (NYSE:BAC) rose. They were up between 1.3% and 2.4%, tracking Treasury yields.
Vaccine hopes for 2021 economic recovery had powered Wall Street’s main indexes to record highs in late-December. However, a more contagious variant of the coronavirus appearing and the latest restrictions dented the sentiment.
Furthermore, analysts also expect the market to consolidate December’s gains in January. Asset managers look to rebalance their portfolios that were leaning toward equities.
Meanwhile, in economic news, bond yields rose, and the dollar fell on Wednesday. This was on the prospect of more stimulus if Democrats take control of the U.S. Senate.