U.S. stocks futures pointed to a sharply lower open for Wall Street on Wednesday, as a market that had been projecting an election victory by Democrat Hillary Clinton scrambled to recalibrate to an upset win by Republican Donald Trump.
S&P 500 futures pared losses by more than half of their overnight drop, however, as Trump struck a conciliatory tone when he took the stage at his Manhattan headquarters in the wake of the victory.
Trump campaigned strongly on taxing imports from Mexico and China and building a wall on the southern border for which Mexico would pay.
Through the night, financial markets reacted violently to poll results and as Clinton's path to victory narrowed to a close. The S&P futures slid 5% and hit a limit down, meaning the contract could not trade lower, only sideways or up. Dow Industrials futures briefly fell 800 points.
Republicans also maintained their majorities in both chambers of the U.S. Congress, enabling the party to reshape Washington with two years of "unified" government.
"The reality is the President doesn’t dominate everything and we are still going to have a fairly split and divided Congress because even though the Republicans technically have control of the House and the Senate, they don’t have strong control," said Jason Pride, Director of Investment Strategy at Glenmede in Philadelphia.
"The lack of strong control kind of handicaps their ability to push through, or handicaps any one person, particularly the President’s ability, to push through extreme policies."
Wall Street is typically seen as preferring gridlock, or shared control of the White House and Congress, than a sweep of both chambers of Congress and the presidency.
As of 8:24 a.m., S&P 500 e-minis were down 30 points, or 1.4%, with 2,367,168 contracts changing hands, Nasdaq 100 e-minis were down 93 points, or 1.94%, in volume of 295,998 contracts and Dow e-minis were down 248 points, or 1.36%, with 355,682 contracts changing hands.
CBOE Volatility index futures shot nearly 40 percent higher at one point, reflecting investors' reservations over a Trump presidency, but sharply retraced that advance after Trump's acceptance speech. The front-month VIX contract was recently up 8.6 percent.
"Certainly it (the trading floor) has a much different tone than what it did just several hours ago, but for now things remain very orderly and we would anticipate that tone to continue or improve as we get closer to the open," said Ryan Larson, head of equity trading, U.S. at RBC Global Asset Management in Chicago, Illinois.
The Mexican peso slumped versus the U.S. currency to a historic low above 20 per dollar. The peso fell as much as 12 percent versus the greenback and was recently down 8% at 19.75.
The iShares MSCI Mexico ETF was down 8.6% in premarket trade.
Pharmaceutical names, which had been expected to come under regulatory pressure for drug pricing in a Clinton presidency, rallied. Pfizer shares jumped 8.2% to $32.45. The iShares Nasdsaq Biotechnology ETF climbed 4.5%.
The sharp moves in various financial assets were reminiscent of the sharp downturn suffered by markets after Britain's vote in June to leave the European Union, known as Brexit, which markets misread. S&P e-minis fell 5.7% over the two sessions following the vote, but the decline proved a buying opportunity as futures regained their pre-Brexit level within 10 sessions.
While stocks fell, traditional safe havens such as gold and U.S. Treasuries rose as investors avoided risk. The U.S. dollar index turned positive and was up 0.2% after falling as much as 2 percent overnight while gold was up 2.4% after climbing as much as 4.9 percent.
Benchmark 10-year notes were last down 25/32 in price to yield 1.9518%, up from 1.86% late on Tuesday, and rose as high as 1.97%, the highest yield since March 16.