NEW YORK, Nov 5 (Reuters) – U.S. stocks surged significantly on Tuesday in a widespread market upturn following positive economic data, even as investors prepared for fluctuations in trading this week amid a tightly contested U.S. presidential election.

The Institute for Supply Management reported that its non-manufacturing purchasing managers index, which measures the services sector, increased to 56.0 in October, up from 54.9 in September, marking its highest level since August 2022 and surpassing economists’ expectations of 53.8.

The results of the election may take several days to determine, as recent polls indicate the competition between Republican Donald Trump and Democrat Kamala Harris remains extremely tight, a factor that has influenced market behavior in recent months.

On Tuesday, Trump’s betting odds improved in markets often viewed as predictors of election outcomes.

“The market is trying to anticipate the election’s result,” explained Rob Haworth, a senior investment strategist at U.S. Bank Wealth Management in Seattle.

“With such a close race, there hasn’t been much movement in prices lately, so minor shifts in investor positions related to potential outcomes are driving us,” he added.

“Both bond and equity markets are closely monitoring Congress too,” he noted. “Most investors expect a divided government, but given how close this election is, any outcome is possible. That’s what adds to the uncertainty,” Haworth added.

The Dow Jones Industrial Average saw an increase of 427.28 points, or 1.02%, ending at 42,221.88, while the S&P 500 climbed 70.07 points, or 1.23%, to 5,782.76, and the Nasdaq Composite rose by 259.19 points, or 1.43%, to 18,439.17.

In contrast, volatility was more noticeable in the government bond and currency markets. The yield on the benchmark 10-year U.S. Treasury note climbed over 10 basis points to a peak of 4.366% before dropping slightly later in the day.

The equity markets managed to sidestep Monday’s fluctuations due to a belief in a softened landing for the economy, supported by solid corporate earnings, lower rates, and a stable job market.

Additional economic data released on Tuesday indicated that the trade deficit reached its highest level in 2.5 years in September due to strong domestic demand leading to more imports, while the potential for increased tariffs under a Trump administration has caused businesses to speed up their imports.

However, the CBOE Volatility Index, also known as Wall Street’s “Fear Gauge,” closed at 20.49, indicating a level above the normal average of 19.46, although it had decreased from a recent high of 23.42.

The industrial sector, up 1.67%, and consumer discretionary sector, up 1.83%, were leading the rise in the S&P 500, contributing to five sectors increasing by at least 1.3% during the session.

Investors are also keenly watching the Congressional elections to see how power might shift in Washington. A split government is anticipated by numerous analysts, which would constrain the president’s capacity to implement significant policy shifts.

Stocks linked to a potential Trump victory experienced considerable price fluctuations, with Trump Media & Technology Group rising as much as 18.64% before falling by 8.42%, being temporarily halted during trading due to volatility, and ultimately closing down by 1.16%.

Cryptocurrency-related stocks followed Bitcoin’s upward trend, which increased by about 3%, as Trump has presented himself as a supporter of the cryptocurrency sector.

Palantir shares surged 23.47%, reaching a record $51.13 after the data analytics firm raised its annual revenue forecast for the third consecutive time.

The Federal Reserve is set to release its latest policy statement on Thursday. Markets currently anticipate a nearly certain 25-basis point rate cut, although future easing expectations are less clear due to the economy’s robustness.

Advancing stocks outnumbered those that declined by a ratio of 4.44-to-1 on the NYSE and 2.67-to-1 on the Nasdaq.

The S&P 500 recorded 23 new 52-week highs and seven new lows, while the Nasdaq Composite noted 110 new highs and 104 new lows.

Trading volume on U.S. exchanges was 12.64 billion shares, above the average of 11.77 billion shares over the past 20 trading sessions.