(Reuters) – Futures tracking the Nasdaq 100 index fell more than 1% on Wednesday, with investors assessing the prospect of Democrats winning both races in the second round of the Senate in Georgia, which will determine the balance of power in Washington .
Edison Research called one race for Democrat Raphael Warnock, toppling current Kelly Loeffler, while challenger Democrat Jon Ossoff had a small lead over Republican David Perdue in the other, with 98% of the votes counted.
A Democratic-controlled Senate would give President Elect Joe Biden more room to act on his reform plans, including a new stimulus from COVID-19, but it could also mean higher corporate taxes and stricter regulations on technology megacapps – policies typically not favored by Wall Street.
“A ‘blue wave’ may not be a bad outcome for the markets, as decisive fiscal action will help accelerate the economic recovery,” said Vasu Menon, executive director of investment strategy at Banco OCBC, Singapore.
“This will be largely optimistic for risky assets, especially stocks, credit, commodities and emerging market bonds.”
At 2:06 am Eastern time, the Dow e-minis was up 89 points, or 0.29%. In general, blue chip Dow constituents are expected to benefit from a resumption of economic activity.
S&P 500 e-minis fell 5.25 points, or 0.14%, and Nasdaq 100 e-minis fell 147 points, or 1.15%.
Hopes for a vaccine-driven economic recovery in 2021 propelled Wall Street’s top indices to record highs in late December, but sentiment was recently shaken by the discovery of a more contagious coronavirus variant and the latest restrictions.
Analysts also expect the market to consolidate its December gains in January, as asset managers seek to rebalance their portfolios that were heavily inclined towards stocks.
Reporting by Sagarika Jaisinghani in Bengaluru; Additional reporting by Scott Murdoch in Hong Kong; Edition of Sriraj Kalluvila