(Reuters) – U.S. stock index futures rose on Monday as investors assessed the chances of a victory for candidate Donald Trump in November’s election after President Joe Biden opted to drop out of the race.
Biden announced Sunday that he was withdrawing from the race and endorsed Vice President Kamala Harris for the Democratic ticket.
Large-cap stocks were higher before the market opened, with Meta Platforms, Alphabet and Apple up between 0.5% and 0.8%, boosting Nasdaq and S&P 500 futures.
As of 4:17 a.m. ET, Dow e-minis were up 54 points, or 0.13%, S&P 500 e-minis were up 18 points, or 0.32%, and Nasdaq 100 e-minis were up 102.5 points, or 0.52%.
Shares of Trump-linked companies, such as Trump Media & Technology Group and software company Phunware, rose 2.8% and 1.4%, respectively.
Most U.S. Treasury yields, including the 10-year, were down as Biden ended his re-election campaign after pressure from fellow Democrats who have lost confidence in his mental acuity and ability to beat Trump.
Biden’s withdrawal from the presidential race could prompt investors to unwind positions betting that a Republican victory would increase fiscal and inflationary pressures in the United States, while some analysts said markets could benefit from an increased likelihood of divided government under the next administration.
“Donald Trump is still the overwhelming favorite to win the presidential election, but betting markets suggest he has a slightly lower probability of beating Harris than Biden,” said Paul Ashworth, chief North America economist at Capital Economics.
“Harris will have a real chance to sell herself to the American public in the second presidential debate, currently scheduled for September 10, even if Trump’s campaign team could pull out, unwilling to face the former lawyer.”
Investors are bracing for a flurry of volatility this week, with a deluge of quarterly earnings coming up, including from two of the “Magnificent Seven” — Google parent Alphabet and Tesla — to gauge the sustainability of the recent rally in high-momentum blue-chip stocks.
Attention will also be focused on key data throughout the week, including the personal consumption expenditures (PCE) price index – the Federal Reserve’s preferred inflation gauge – durable goods and second-quarter GDP for clues on the path of the U.S. central bank’s monetary policy.
Traders have broadly priced in a 25 basis point rate cut by September and two cuts by year-end, according to FedWatch data from LSEG and CME.
The Nasdaq and S&P 500 both posted their biggest weekly declines since mid-April as investors shifted away from expensive technology stocks to underperforming sectors of the market, helping the small-cap Russell 2000 index post its second straight weekly gain.
Among other stocks on the move, Nvidia rose 1.3% after Reuters reported that the AI chip leader was working on a version of its new flagship AI chips for the Chinese market that would be compatible with current U.S. export controls.
Bank of America shares fell 1.5% after Berkshire Hathaway sold about 33.9 million shares of the group…
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