Nov 6 (Reuters) - Donald Trump's return as U.S. president for the second time on Wednesday boosted equity markets on bets of lower corporate tax, favorable tariffs and deregulation, lifting shares of banks, locally focused small-cap companies and Trump Media (DJT.O), opens new tab.
His promise to make Tesla CEO Elon Musk head of a government efficiency commission after the billionaire backed Trump throughout his electoral campaign led to a 12.5% surge in the shares of the electric automaker.
Wall Street's main indexes opened at record highs, while the small-cap Russell 2000 index (.RUT), jumped about 4.8% to its highest in nearly three years.
"Business animal spirits could be rekindled once again from Trump's pro-business approach which could lead to a more robust capital expenditures and investment environment," said Jeff Schulze, market strategist at ClearBridge Investments.
Trump Media & Technology Group, in which Trump owns a majority stake rose nearly 8% in choppy trading. Investors overlooked the company's latest quarterly results that showed the Truth Social parent's revenue was just $1 million.
The shares have more than tripled in value from their all-time lows in late September, and Trump's stake was worth as much as $5.3 billion, up from $3.9 billion on Tuesday.
POLICY DETAILS AWAITED
Trump's Republican Party also secured the Senate and was making gains in the House of Representatives, potentially making it easier for the president to legislate his proposals and push through key appointments.
Markets "have priced in a pretty strong mandate for the Republicans and are biasing toward most of the Trump trades", said Scott Chronert, U.S. equity strategist at Citi.
"Policy details will be important for here as the market focus seems to be putting more emphasis on deregulation, tax cuts, and a more business-friendly backdrop."
Wall Street lenders JPMorgan Chase (JPM.N), Bank of America (BAC.N), and Goldman Sachs (GS.N), jumped between 6% and 10% on prospects of improving domestic investment, looser regulations and more deals.
"Trump's win likely means some deregulation, including rolling back banking regulations, though big tech may remain a bipartisan antitrust focus," strategists at BlackRock Investment Institute said in a note.
Semiconductor stocks advanced, with the Philadelphia chip index rising 1.8% and AI darling Nvidia (NVDA.O), gaining 2.7% despite Trump's criticism of the U.S. CHIPS and Science Act, which supports domestic chip manufacturing through subsidies.
Trump has instead proposed tariffs on imported chips, particularly from Taiwan's TSMC, whose U.S.-listed shares dropped 3%.
Oil stocks (.SPNY), firmed 3.5%, while U.S. renewable energy companies such as NextEra Energy (NEE.N), and First Solar (FSLR.O), plunged 6% and 13%, respectively.
Trump's campaign laid out an energy policy platform centered around maximizing U.S. fuel and power output, in part by dismantling the Biden administration's efforts to fight climate change.
AUTOS, CRYPTO AND CHINA
While Tesla shares surged on Musk-Trump proximity, stocks of other electric automakers dipped as Trump had said he would consider ending a $7,500 tax credit for EV purchases.
Rivian Automotive (RIVN.O), dropped 8% and Nikola (NKLA.O), slipped about 1.4%.
"Nobody is making money in EVs aside from Tesla, so the reduction or elimination of EV credits will widen Tesla's competitive moat," said Garrett Nelson, senior equity analyst at CFRA Research.
Fears of escalation in Sino-U.S. tensions pressured U.S.-listed China shares with iShares MSCI China ETF (MCHI.O), dropping nearly 2.4%.
Import duties, including a 10% universal tariff on imports from all foreign countries and a 60% tariff on imports from China, are a key plank of Trump's policies and likely to have the biggest global impact.
Victory for Trump, who has positioned himself as pro-cryptocurrency, lifted bitcoin to a record high. Crypto-linked stocks Coinbase (COIN.O), MicroStrategy (MSTR.O), Riot Platforms (RIOT.O), MARA Holdings (MARA.O), jumped between 11% and 21%.
Private prison operators Geo Group (GEO.N), and CoreCivic (CXW.N), jumped about more than 30% each as Trump's promised crack down on illegal immigration could boost demand for detention centers.
U.S. steel makers Cleveland-Cliffs (CLF.N), Steel Dynamics (STLD.O), and Nucor (NUE.N), surged between 13% and 19%, with analysts having noted in the run-up to the election that a Trump presidency may mean rising protections for the domestic steel industry.
Reporting by Medha Singh in Bengaluru; Additional reporting by Aishwarya Venugopal, Zaheer Kachwala and Nathan Gomes; Editing by Arun Koyyur
