Stocks closed mostly flat on Friday as traders looked for clarity around the presidential and congressional election results.
The S&P 500 ended the session down about 1 point at 3,509.44. The Nasdaq Composite rose less than 0.1% to 11,895.23. The Dow Jones Industrial dipped 66.78 points, or 0.2%, to end the day at 28,323.40.
Energy and financials were the worst-performing sectors in the S&P 500, falling 2.1% and 0.8%, respectively. UnitedHealth led the Dow lower with a decline of nearly 2%.
Democratic nominee Joe Biden leads with 253 electoral votes, according to NBC News projections, while President Donald Trump has 214. Votes are still being counted in several key states including Nevada, Arizona, Pennsylvania and Georgia. According to NBC News, Biden has a slight lead in Georgia and Pennsylvania.
Despite the uncertainty around the presidential vote, Wall Street notched its best weekly performance since April. The S&P 500 and Nasdaq jumped 7.3% and 9%, respectively, for the week. The Dow rose 6.9% this week. The S&P 500 also posted its biggest election week gain since 1932.
Victories by Republicans in several key Senate races, thus lowering the odds of a "blue wave" and the potential for higher taxes and stronger regulations, have been cited by Wall Street strategists as a reason for the rally in stocks. However, Republicans have not yet won the necessary seats to control the Senate, according to NBC News projections, with two potential run-off elections in Georgia.
"The market is just getting more comfortable with the outcome of a divided government, where we see a continuation of political gridlock [and] no meaningful changes on tax policy," said Dan Eye, head of asset allocation and equity research at Fort Pitt Capital Group.
To be sure, a divided government could make it harder for lawmakers to push through new fiscal stimulus. The Washington Post also reported, citing sources, that the White House wasn't expected to propose a new aid package. Instead, Senate Majority Leader Mitch McConnell is expected to push through a "skinny" aid package, which has been dead on arrival with House Democrats, according to the report.
Alicia Levine, chief strategist at BNY Mellon Investment Management, said that the possibility of Democrats winning narrow control of the Senate was one of the major risks not priced into the market even if the runoffs wouldn't necessarily cause the markets to dip.
"The market is now pricing in a Biden presidency with a Republican Senate, and the rotation that we saw was based on that," Levine said. "And if there's an increasing risk that that's not the case for the Senate, then this entire move could also be somewhat at risk as well."
Levine also said that the strength of tech stocks earlier this week was due in part to their strong earnings performance and resiliency in the case of new economic restrictions in the United States during the winter to slow the spread of the coronavirus.
Republicans have filed a flurry of legal challenges in several states related to the ongoing vote counts, and the Trump campaign said it will request a recount in Wisconsin.
In an announcement from the White House on Thursday night, Trump falsely claimed victory in several states and made accusations of voter fraud without evidence, saying "there's a tremendous amount of litigation generally because of how unfair this process was."
The Biden campaign, meanwhile, has called for all votes to be counted.
"Democracy's sometimes messy. It sometimes requires a little patience as well," the former vice president in a short speech in Delaware on Thursday, adding that he was confident his ticket would be declared the winner once all the votes are counted.
Sentiment on Friday was boosted by better-than-expected U.S. unemployment data.
The Labor Department said the U.S. unemployment rate fell to 6.9% in October from 7.9%. Economists polled by Dow Jones expected the rate to dip to 7.7%. The U.S. economy also added 638,000 jobs last month, topping an estimate of 530,000.
"The latest jobs report shows the U.S. economy is rebounding quickly from COVID-related shutdowns in the spring with the unemployment already dropping below 7%," said Tony Bedikian, Head of Global Markets at Citizens.
"Despite strong signals that many Americans are getting back to work, however, the number of coronavirus cases is rising and that may mean new restrictions on daily life that could further accelerate a shift to a more digital economy and increase calls for additional government stimulus," Bedikian added.