*

Polls show tight race, Trump leads in betting markets

*

Trump-linked stock sees large swings

*

Palantir ( PLTR ) soars after results

(Updates to market close)

By Chuck Mikolajczak

NEW YORK, Nov 5 (Reuters) -

U.S. stocks closed sharply higher in a broad rally on

Tuesday after data signaled a solid economy, but investors

braced for volatile trading this week as voting was underway in

an extremely tight U.S. presidential election.

The Institute for Supply Management said its

non-manufacturing purchasing managers index, a gauge of the

services sector, accelerated to 56.0 last month, its highest

since August 2022, from 54.9 the prior month and above the 53.8

expected by economists polled by Reuters.

The election outcome could take days to be finalized as the

latest polls showed the race between Republican Donald Trump and

Democrat Kamala Harris, which has impacted markets in recent

months, was too close to call.

The former president's odds improved on Tuesday in betting

markets that many investors see as election indicators.

"The market continues to try and price for what is the

outcome of this election," said Rob Haworth, senior investment

strategist at U.S. Bank Wealth Management in Seattle.

"It's been so tight and even if we look at the price

range we've been in, we've been in a tight price range, and so

what's really moving us is marginal positioning for one result

or the other."

"Both the bond market and the equity market are looking

at Congress as important as well," he added. "Most base cases

are for divided government, but this election is so close we

could get any outcome. That's the challenge."

According to preliminary data, the S&P 500

gained 70.42 points, or 1.23%, to end at 5,783.11 points,

while the Nasdaq Composite gained 259.19 points, or

1.43%, to 18,439.17. The Dow Jones Industrial Average

rose 431.42 points, or 1.04%, to 42,227.74.

Volatility was more pronounced in government debt and

currency markets. The benchmark 10-year U.S. Treasury note yield

rose more than 10 basis points to a high of 4.366%

before paring gains on a solid auction, and was last down

slightly on the day.

Equity markets avoided Monday's volatility on expectations

of a soft landing for the economy, bolstered by corporate

earnings, lower interest rates and a resilient labor market.

Other economic data on Tuesday showed the trade deficit hit

a 2-1/2 year high in September, as domestic demand draws in

imports while concerns about higher tariffs under a Trump

presidency have led to a front loading of imports by businesses.

Still, the CBOE Volatility Index, also known as Wall

Street's "Fear Gauge," was slightly higher than its long-term

average of 19.46, although it had eased from a near-two month

high hit last week of 23.42.

Industrials and consumer discretionary

led S&P 500 sectors higher.

Investors are also keeping an eye on Congressional elections

to determine the balance of power in Washington. Many analysts

predict a split government, which would limit the ability of the

president to enact significant policy changes.

Stocks viewed as proxies on a win for the former president

experienced large swings, with Trump Media & Technology Group ( DJT )

climbing as much as 18.64% and dropping as much as

8.42%, while also being halted for volatility multiple times.

Crypto stocks tracked bitcoin higher, with the

cryptocurrency up roughly 4%, as Trump has positioned himself as

an ally to the sector.

Palantir ( PLTR ) surged to a record high after the data

analytics firm raised its annual revenue forecast for the third

time.

The Federal Reserve will announce its latest policy

statement on Thursday. Markets have almost completely priced in

a 25-basis point interest rate cut, but the outlook for the path

of future easing is less certain given the U.S. economy's

strength.