The Dow is on pace for its strongest post–Election Day rally in 120 years – MarketWatch

The U.S. presidential election remains undecided, but that has not stopped the stock market from taking aim at its best day after an election in more than 100 years.

The Dow Jones Industrial Average

was near its intraday high, up more than 705 points, or 2.6%, at 28,185 near midsession Wednesday, which would represent the sharpest daily gain for the 124-year-old benchmark since the 3.33% return rung up after the 1900 presidential race won by Republican President William McKinley over Democratic rival William Jennings Bryan.

Read: Trump, Biden race goes into overtime as battleground states hang in balance: live blog

The 2020 race between President Donald Trump and former Vice President Joe Biden remains too close to call a day after Election Day. There appear to be multiple paths to victory for each candidate.

If Biden were to win Nevada, Michigan and Wisconsin while Trump took the other outstanding races, that would get the Democratic challenger to the bare minimum of 270 electoral votes. Biden also could get to 270 if he won Maine’s 2nd congressional district, Nevada, North Carolina and Wisconsin, as Trump looks likelier to have claimed the other states not yet called.

See: Here’s what we know about the eight states whose Electoral College votes haven’t been called

The tight race belies the wide margin of victory that had been implied by polling data leading up the race for the Oval Office. Those polls also pointed to a so-called blue wave resulting in a Democratic sweep of the White House and majorities in not just the House but the Senate .

Although that outcome has not materialized, Wall Street is betting that Biden will eke out a victory and Republicans will retain majority control of the Senate. That scenario is seen as positive for equity markets over the longer term because it will limit Biden’s ability to raise corporate taxes, roll back Republicans’ 2017 tax overhaul, and enact stricter regulations on industries including technology.

Meanwhile, the S&P 500 index

was up 3.2% and tracking its most potent postelection Day surge on record, according to Dow Jones Market Data.

Dow Jones Market Data

The Nasdaq Composite Index

was up 4.2%, which would also be the index’s best return the day after a presidential election on record. To be sure, the Nasdaq Composite was first published in 1971 and the S&P 500 in 1957, making both markedly younger than the Dow.

The market’s reaction to what amounts to an undecided election still remains a puzzle to many market participants. However, many traders are arguing that the stock market is a predictive mechanism that rarely trades simply on the day’s news.