With the midterm elections resulting in a divided Congress, investors celebrated the likelihood that major policy changes may not be forthcoming anytime soon, triggering a powerful and broad-based rally in stocks Wednesday. The Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) opened higher and rose throughout the session, fueled by gains in growth stocks.

Today's stock market

Index Percentage Change Point Change
Dow 2.13% 545.29
S&P 500 2.12% 58.44

Data source: Yahoo! Finance.

All sectors rose, with healthcare stocks in particular climbing on the prospect of gridlock in Washington; the Health Care Select Sector SPDR ETF (NYSEMKT:XLV) jumped 2.9%. Consumer discretionary stocks also had big gains after being hit hard last month, with the Consumer Discretionary Select SPDR ETF (NYSEMKT:XLY) closing up 2.7%. 

The passage of state marijuana initiatives produced renewed interest in the stocks of producers of cannabis, which had taken a breather last month after making some spectacular gains earlier in the year. Canadian pot producer Tilray (NASDAQ:TLRY) had a particularly good day, climbing 30.6%, while cannabis peers Canopy Growth (NASDAQ:CGC) and Aurora Cannabis (NASDAQ:ACB) saw gains of 8.2% and 9.2%, respectively.

Upward arrows coming from a flash of light above a man's hand.

Image source: Getty Images.

Marijuana votes, Sessions resignation lift pot stocks

Marijuana initiatives passed in three states yesterday, giving a boost to the stocks of several cannabis producers. Michigan became the 10th state to legalize adult recreational use of the drug, and Missouri and conservative Utah approved medical marijuana use. Late in the trading day, breaking news about the resignation of Attorney General Jeff Sessions, a vocal opponent of pot legalization, added further momentum to the stocks.

Michigan's Proposal 1 makes that state the first in the Midwest to legalize recreational use of the drug for people 21 and older, with sales subject to a 10% excise tax. State authorities will determine when retail sales can begin, and that may be a year or more in the future. Utah's Proposition 2 legalizes marijuana use by people with qualifying medical conditions, but doesn't allow consumption by smoking. Missouri voters cast ballots on three different measures, approving one for medical marijuana with a 4% tax that will go to healthcare benefits for veterans.

It wasn't a win across the board for marijuana proponents. North Dakota voters defeated Measure 3, which would have legalized adult recreational use and expunged records of people convicted of having used drugs that were later legalized.

Tilray, Canopy, and Aurora aren't likely to benefit immediately from the initiatives, with the U.S. federal prohibition of marijuana inhibiting the ability of Canadian cannabis companies to export products to the U.S. market. But investor demand for marijuana stocks remains high. Moreover, the small number of shares available and the high short interest make Tilray's stock in particular very volatile. Coming on the heels of legalization in Canada last month and recent polls showing support for a similar move in this country, there was enough positive news to make investors jump into these somewhat speculative marijuana stocks.

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