Has Big Tech locked in two more years of dominance?

It's been a good week to own shares of Amazon, Microsoft and Apple.

Posted Updated

Julia Horowitz
, CNN Business
CNN — It's been a good week to own shares of Amazon, Microsoft and Apple.

What's happening: Americans are on tenterhooks about the outcome of the US election. In key battleground states like Georgia and Pennsylvania, votes are still being counted. But Wall Street is confident it knows how the story ends — and believes the results will boost the top names in tech.

"What you got is really a Goldilocks scenario for tech investors," Wedbush Securities analyst Dan Ives told me.

The tech-heavy Nasdaq Composite has jumped almost 9% this week, on track for its best weekly performance since April. Amazon and Apple shares have shot up more than 9%, while Microsoft's stock is 10% higher.

Breaking it down: We still don't know with certainty how the election results will play out. Investors, however, are trading on the assumption that Republicans will retain control of the Senate for at least the next two years, while former Vice President Joe Biden will take the White House.

A divided government, instead of a "blue wave" giving Democrats complete control of Congress, is being read as good news for riskier assets like stocks — especially the tech sector.

That's because Wall Street believes a Republican Senate will stop a Biden administration from dramatically hiking corporate taxes, while lowering the risk of major regulatory action.

"[A] blue wave was viewed as initially positive for stimulus ... but on the other side of that, into 2021, the Street ultimately feared what that would do the tax structure of corporations, as well as antitrust momentum," Ives said.

In short, investors see at least two more years of status quo. And the current environment has been decidedly positive for tech.

See here: While the S&P 500 has gained 8.7% year-to-date, Amazon has rallied nearly 80%.

During the pandemic, tech stocks have benefited from investors looking to play both offense and defense. On one hand, these companies are growing rapidly, as demand for cloud computing, delivery and online services ramps up. They also are somewhat sheltered from the negative effects of the Covid-19 economy, since keeping stores open isn't a critical part of their business.

"[The pandemic] further fuels the work-from-home tech trade that's been working since March," Ives said.

The election and the trajectory of the pandemic may have convinced investors that tech stocks remain the place to be. But risks remain.

Market concentration among just a few names remains a point of concern. Right now, Microsoft, Amazon, Apple, Facebook and Google parent Alphabet make up nearly a quarter of the value of the S&P 500.

In a note to clients Thursday, Capital Economics said that following the election, it expects the dominance of a few very large high-growth firms — namely, the tech giants — to maintain their dominance over smaller, value-oriented companies. The research group noted that in contrast to the Nasdaq, "value-heavy small cap indices have barely risen" since Tuesday.

And tech companies may still face some challenges, especially because Democrats and Republicans agree that Big Tech needs greater oversight. Regulation is not off the table, and the Department of Justice's lawsuit against Google, which claims that the company stifled competition to maintain its powerful position in the online search marketplace, is ongoing.

More signs that the US recovery is slowing

Nearly half of the 22 million US jobs lost during the Covid-19 crisis have been recovered. But the pace of improvement has tapered off in recent months, sparking concerns that the country's recovery is losing steam ahead of a difficult winter.

Economists surveyed by Refinitiv expect to learn Friday that the US economy added 600,000 jobs in October, my CNN Business colleague Anneken Tappe reports. That would be the smallest gain in five months, and would mean that the nation is still some 10 million jobs short of where it was before the pandemic.

"High-frequency labor market information indicates further deceleration in job growth, consistent with a drag from the virus resurgence and fiscal fizzle," Goldman Sachs chief economist Jan Hatzius told clients, referring to declining support for businesses from the federal government.

The United States reported more than 120,000 new coronavirus cases on Thursday, shattering records. There were at least 1,187 reported deaths, a nearly 20% increase from the same day last week.

Big picture: Economists and investors think the US recovery can continue if the country avoids fresh restrictions like those recently enacted across Europe. But as the virus situation continues to deteriorate, that looks tricky — and the data is already getting softer.

A survey from the Institute for Supply Management released this week showed that the US services sector kept growing in October, its fifth straight month of improvement. However, the index based on the survey fell 1.2 percentage points compared to September, the weakest reading since May.

The pandemic is still taking a toll on companies like Uber

Uber just scored a political win in its home state of California. But that won't solve another big problem: The company is still getting battered by the pandemic, which is weighing on demand for sharing rides.

The latest: On Thursday, the company reported revenue of $3.1 billion for its most recent quarter, down 18% compared to the same period last year and falling just short of Wall Street's estimates.

The company's revenue from rides declined 53%, while revenue from its Eats food delivery service — a bright spot for Uber — grew 125% from one year ago.

Investor insight: Uber's shares are down nearly 2% in premarket trading. They skyrocketed earlier this week after California voters approved a ballot measure known as Prop 22, allowing the company to continue treating its drivers as independent contractors rather than employees. That gave Uber confidence it would be able to defend its business model for classifying workers on a broad scale.

Uber's goal is still to attain profitability before the end of next year. But a worsening pandemic could make that difficult.

The recovery in ride bookings "continues to be directly correlated with the level of lockdown restrictions in any given city," CEO Dara Khosrowshahi said on a call with analysts.

Up next

Coty, CVS, Hershey, Marriott and ViacomCBS report results before US markets open.

Also today: The US jobs report for October posts at 8:30 a.m. ET. It will include details on jobs created, the unemployment rate and wages.

Coming next week: Disney reports earnings as the pandemic continues to hammer its parks business and movie release schedule.

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