Extreme election night volatility persisted in U.S. equity futures, with S&P 500 contracts swinging between gains and losses, as investors worked to price in shifting odds for Donald Trump’s re-election and control of the Senate, a potentially protracted vote count and the implications for economic stimulus.

December contracts on the benchmark equity gauge swung from a gain of 2.1 per cent to a loss of 1.3 per cent, only to bounce back to a 0.8 per cent advance by 9:50 a.m. in London. Futures on the Nasdaq 100 Index, a defensive trade all year, jumped 2.8 per cent. The dollar was also on a roller-coaster ride, surging as much as 1 per cent before settling for a gain of 0.6 per cent. Treasury yields slumped, with the 10-year benchmark down to 0.80 per cent.

Trump said it was “a fraud on the American public” to continue counting ballots and he would ask the Supreme Court to intervene, even as he claimed without evidence to win a second term.

“It’s the worst outcome for markets,” said Adrian Lowcock, head of personal investing at investment platform Willis Owen. “The election is much closer than many pundits expected, with Trump holding key battleground states including Texas, and a clear and quick result is looking less and less likely.”

Joe Biden scored initial wins in traditionally Democratic states in the eastern U.S. while Trump won Republican strongholds in the south and Midwest, according to the Associated Press and networks. With key states likely needing some time to count mail-in ballots that will potentially decide the election, investors have started bracing for days of uncertainty. Democratic chances of taking control of the Senate narrowed considerably.

“In the short term, this is disappointing for markets and raises the prospect of several days or even weeks of uncertainty and possible legal challenges,” said Richard Carter, head of fixed income research at Quilter Cheviot.

“Investors had also been hoping that a clear victory would open the door to a massive stimulus package which would boost the U.S. economy. This now appears unlikely, at least in the short term, so we would expect to see some volatility today as markets digest the situation.”

Markets have been volatile during the final weeks of the campaign as investors fretted over the potential for a contested outcome, a surge in coronavirus cases and stretched valuations that make megacap tech shares look expensive as the economic rebound starts to slow. The S&P 500 has moved at least one per cent six of the past seven sessions.

Trump won Florida, a crucial prize in the race to the White House that closed off former Vice President Biden’s hopes for an early knockout in the election.

While Biden’s solid lead in polls had some investors speculating there would be a relatively quick decision on who will prevail, a surge in mail-in ballots has made it more likely that some states won’t be able to declare a winner in the immediate aftermath of the voting. That exposes markets to a drawn-out process for determining the next president.

Adding to anxiety is that markets haven’t always been prescient in knowing what outcome they’d prefer. In 2016, Trump’s perceived recklessness was considered bad news for a stock market that detests uncertainty. Futures plunged the maximum five per cent as he took the lead late on Nov. 8, 2016. By morning, as investors warmed to his pledges of cutting taxes and slashing regulations, futures had rebounded higher. The S&P 500 has rallied 57 per cent since his surprise win.

Investors had come around on Biden as his lead solidified, banking on his promise to broker a massive aid package to jumpstart the economy hit by the pandemic. Assets seen benefiting most from a Biden administration climbed alongside his polling lead. The Invesco Solar ETF, ticker TAN, has surged over 140 per cent in the past six months, buoyed by optimism that Biden would boost infrastructure and green-energy spending. The fund fell 6.9 per cent in U.S. pre-market trading Wednesday.

Shares of big technology companies, which surged this year as the pandemic boosted their sales, gained Wednesday amid the uncertainty. Among London-listed exchange-traded funds, the iShares S&P 500 Information Technology Sector ETF rose 2.8 per cent and SPDR S&P U.S. Technology Select Sector UCITS ETF gained 1.7 per cent.

Hopes of a multitrillion-dollar fiscal aid package has boosted benchmark Treasury yields to the highest level since June, dragging beaten-down shares of financial companies higher as well. Meanwhile, the Nomura-Wolfe Biden Election Basket -- a group of stocks that wagers on potential winners from a Democratic victory while betting against shares seen as losers -- climbed to a record on Monday. The basket holds 30 pair trades across sectors including technology, health care, utilities and others.

But not all outcomes under Biden are considered market-friendly. He also has pledged to roll back the huge tax cuts that Trump handed corporate America back in 2017, a move that, irrespective of the public-policy merits it may have, at least has the potential to create stress for equities. Democrats have also promised tighter financial regulation and will look at how megacap tech companies operate.

Another possibility is that a Biden win is not accompanied by Democrats taking over control of the Senate, leaving Congress divided. That could temper expectations for a spending bill and threaten to stall much of Biden’s platform.

The S&P 500 retreated in both September and October after a torrid summer rally. It closed Tuesday about 6 per cent below its all-time high.

“The closer the race is, the bigger the risk is,” said Erika Karp, founder and CEO of Cornerstone Capital Group. “A close outcome is a risk to the market. The longer it drags out, the bigger the risks.”

--With assistance from Vildana Hajric.