By Ankika Biswas, Shubham Batra and Lisa Pauline Mattakal
(Reuters) – U.S. and Australian stocks recovered some of the previous week’s losses on Monday, as investors reconsidered Republican candidate Donald Trump’s chances of winning a second presidential term after U.S. President Joe Biden dropped out of the race.
Biden announced his withdrawal and endorsement of Vice President Kamala Harris for the November election on Sunday. Online betting site PredictIt showed the price of Donald Trump winning down 4 cents to 60 cents, while Harris’s win was up 12 cents to 39 cents.
Stocks rose after a three-day sell-off, with tech giants Alphabet (NASDAQ:), Meta Platforms (O:) and Tesla (NASDAQ:) rising between 1.8% and 3%.
The IT index led the gainers and was on track to end a four-day losing streak.
The S&P 500 was down 28.28 points, or 0.51%, at 5,533.28, while the S&P 500 was up 130.89 points, or 0.74%, at 17,857.83.
Trump-related stocks were mixed, with Trump Media and Technology Group down 2.4%, while software company Fonware rose 1.4%.
Biden’s exit could prompt investors to unwind positions based on bets that a Republican victory would add to fiscal and inflationary pressures in the United States. But some analysts said markets could benefit from the increased chance of a divided government under the next administration.
“Trump is still in the lead, but everyone is also waiting to see who Harris will pick as his running mate, which adds uncertainty but also a little excitement to the campaign,” said Sam Stovall, chief investment strategist at CFRA Research.
The question of who will be on the Democratic presidential ticket is adding to investor jitters ahead of quarterly earnings, including from two of the Big Seven companies — Alphabet and Tesla.
The results will test whether the recent rally in high-momentum, blue-chip stocks is sustainable and whether the move into underperforming sectors will continue. The small-cap sector gained 0.3%.
“There is a tremendous amount of underperformance in small-cap stocks that investors can take advantage of… they are very inexpensive by historical standards,” Stovall said.
Crucial economic data is due this week, including the personal consumption expenditures price index – the Federal Reserve’s preferred measure of inflation, which is expected to shed light on the outlook for monetary policy.
According to FedWatch data from LSEG and CME, traders have broadly priced in one 25 basis point rate cut by September and two cuts by the end of the year.
Cybersecurity company CrowdStrike (NASDAQ: CXN) shares fell 12.9%, set to extend losses after a software update from the company caused a global technology outage on Friday.
Delta Air Lines Inc (NYSE:DEL) shares fell 1.9% after more than 600 flights were canceled as it struggled to restore operations after the outage.
Nvidia (NASDAQ:) shares rose 2.5% after Reuters reported that the AI chip leader is working on a version of its new flagship AI chip for the China market that will be compliant with existing U.S. export controls.
Verizon Communications Shares of the company (NYSE:) fell 6.1% after it failed to deliver revenue in the second quarter.
Advancing issues outperformed declining issues by a ratio of 2.00 to 1 on the NYSE and 1.33 to 1 on the Nasdaq.
The S&P recorded 10 new 52-week highs, while the Nasdaq recorded 34 new highs and 69 new lows.
