(Reuters) - U.S. stocks surged on Wednesday, while longer dated Treasury yields buckled on Wednesday as results from the U.S. presidential election proved far closer than expected and the Senate appeared likely to remain in Republican hands, keeping legislative gridlock in place. Early in the count, betting markets flipped from having for months assumed a win for Democrat challenger Joe Biden to suddenly price a high probability President Donald Trump would keep the White House. But as votes continue to stream in they have jumped back sharply in favor of Biden in recent hours and many investors still think it’s still too close to call. With Republicans holding on to the Senate and preventing a Democratic ‘clean sweep’ of the Presidency and Congress, Democrat policy initiatives are unlikely to be implemented, although a stimulus package may now be on the horizon. Click here for Election 2020 coverage: here COMMENTS: MICHAEL DE PASS, GLOBAL HEAD OF U.S. TREASURY TRADING, CITADEL SECURITIES, NEW YORK “Yesterday afternoon the market was probably pricing in about 70%-75% chance of a Dem sweep…the back end of the curve was for sale and there was significant selling pressure. As Trump won Florida and you realized this was going to be a bit of a close race and not a landslide, the tone changed very, very quickly.” “You saw some dip buyers certainly show up from the real money community…I think you had some international real money think, ok, this begins to make a little bit of sense to us, there’s some value here, and that really drove the market, together with what felt like offside positioning around the Dem sweep idea.” CARSON BLOCK, FOUNDER, MUDDY WATERS RESEARCH, CALIFORNIA “We will have many more years of emergency monetary policy stimulation. With Republicans keeping the Senate, it is likely that they will return more to their conservative roots and that while there will be stimulus, it will be more restrained. This means that there could be less of a chance for bailouts, putting some industries, including the airline industry, at more risk. At the same time a Biden administration, if he wins the White House, would likely become more aggressive in terms of SEC enforcement actions and pick up the pace at the Justice Department in terms of Foreign Corrupt Practices Act probes. But the wild card will be U.S. listed Chinese companies.” GARY BRADSHAW, SENIOR VICE PRESIDENT, HODGES CAPITAL MANAGEMENT, DALLAS “Markets wise, I’m feeling great. The market is certainly pleased that we are kind of unwinding this “Blue Wave” trade. The market likes the fact that we have a gridlock. We are not likely to see big tax increases, and not a lot of regulation. We are not likely to see a green, new deal. It’s just not logical. It’s pretty much a relief rally. We like the outcome, even if we like to stay with Trump on the Presidency side.” SAMEER SAMANA, SENIOR GLOBAL MARKET STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE, ST. LOUIS “For the time being the market is assuming it could be a Biden presidency. Its also assuming Republicans have fought off enough challenges to where they’ll probably hold the Senate. We won’t have final results there until the run-offs in Georgia in January. So in some ways we won’t know the final results of the 2020 elections until 2021.” “Right now markets are betting Republicans will hold onto the Senate. One thing that jumps out is that you’ve growth stocks doing better than value stocks. That means a Republican Senate will tamp the brakes on any large stimulus packages. They’ll probably make (stimulus) a bit more targeted. They’ll probably put the brakes on tax increases. They also make the possibility of infrastructure maybe less likely.” LINDSEY BELL, INVESTMENT STRATEGIST AT ALLY FINANCIAL “It’s the day after a pivotal election, and the jury is still out on who the next president will be. Yet, stocks are up across the board. We’re bound to learn more about the presidential race and other contests in the coming days as ballots are counted. It looks likely that we’ll see a split Congress, which, based on history, has been the preference of the stock market. You can see this expectation being priced into the market today with health care, communication services and technology stocks are leading the market. Notably, a split Congress may also mean a smaller chance for another big round of fiscal aid for U.S. businesses and individuals. We have a lot to learn in the next few weeks.” SANJAY CHWALA, CHIEF INVESTMENT OFFICER, FM GLOBAL “The markets were very much setting up for a blue wave. This result takes that off the table, which we’re seeing in price action in equity markets this morning. It is being taken very positively by the markets that it will not be one party that has the House, Senate and the White House.” JOSEPH LITTLE, GLOBAL CHIEF STRATEGIST, HSBC GLOBAL ASSET MANAGEMENT, LONDON “For now, we remain constructive on the U.S. economic outlook, on further fiscal support and loose monetary conditions. “Electoral uncertainty may cause some near-term market volatility, but we remain overweight on U.S. equities, and stay strategically underweight U.S. Treasuries, given low prospective returns and bond yields. “Fiscal stimulus measures are still expected in 2021 which can still push yields higher (prices lower), even if Fed policy action reduces this risk. Recent market performance also challenges the assumption that government bonds can act as a reliable portfolio diversifier.” EDWARD MOYA, SENIOR MARKET ANALYST, OANDA, NEW YORK “It’s so difficult to gauge what’s being priced in, but the one thing that you can’t ignore is that move in Treasuries. We saw solid selling, the steepening of the curve, and the reflation trade… I think so many people were expecting that 10-year yield to be at 1 percent, and now I think you’re probably going to see us be lower for longer…there is still a whirlwind of uncertainty and I think you’re probably going to see safe haven buying because of those concerns and that’s going to keep yields under pressure and ultimately people are going to want to still hold U.S. stocks. “Markets are repositioning because everyone was kind of getting ready for those Democratic policy trades and now its like ok, we’re not going to buy Caterpillar and Tesla because we’re going to have all these clean energy initiatives and now its like tech is looking pretty good, no tax hikes, regulation’s not going to be as bad and I think you’re probably going to see financials be pretty attractive here, so you’re going to see a lot of moving around of positioning. But we’re not getting that cyclical rotation which I think was really what was needed to accelerate that move to record high territory for equities. “What’s tough is you can’t even say for sure what the results are going to be, but a split congress is likely. The Contested election outcome and this going to the courts, that is what I think everyone does not want and it is a risk if you don’t have that certainty then you’re going to eventually see that risk aversion will persist like we saw in 2000 and that could be short term negative for stocks.” BRIAN JACOBSEN, SENIOR INVESTMENT STRATEGIST, MULTI-ASSET SOLUTIONS, WELLS FARGO ASSET MANAGEMENT, MENOMONEE FALLS, WISCONSIN “While we still don’t have results full results, it looks like instead of a red wave or blue wave scenario — with all respect to Prince — we have more of a purple rain scenario with gridlock being the most likely outcome. “That could mean less likelihood of fiscal stimulus, but it could also mean a lower likelihood of big changes to tax policy or regulatory policies. Regardless, we believe the economy is more important than the election to the markets.” NIKESH PATEL, HEAD OF INVESTMENT STRATEGY, KEMPEN CAPITAL MANAGEMENT, LONDON: “From our perspective, we have gone into this situation pretty finely balanced. We were reminded very much of four years ago when we had a clear view on what was likely to happen and we were wrong. So, going into this one we had a very small wedge towards a Biden victory but we were very much aware that Trump could surprise again and therefore we haven’t taken any large positions. “You normally you find the VIX index drops quite quickly after an election after there’s a clear view, one way or the other, of what the outcome is going to be. It doesn’t have to be the right outcome but as long as the outcome is known, volatility tends to drop. The race is far tighter than anyone who was in the blue wave category was expecting. “If there was a stomping victory for Biden and a Democratic Senate, big tech would rightly have expected greater regulation and an increase in taxes. The fact that some Republicans like Lindsey Graham and others have retained their seats mean the odds of a Democrat Senate have dropped dramatically. So, the odds of a really bad situation from a big tech perspective have diminished and that has then led to their stocks performing better.” For additional quotes in an earlier version of this story click