By Sagarika Jaisinghani and Medha Singh

(Reuters) - U.S. stock futures jumped on Thursday as investors bet that a Republican held Senate would block any moves by a Joe Biden administration to tighten regulation and raise taxes on corporate America, even as the presidential election remained too close to call.

Futures tracking the benchmark S&P 500 surged as much as 2%, while Nasdaq 100 futures gained 2.6% a day after Wall Street's main indexes closed at more than one-week highs.

With President Donald Trump and his Democrat rival Biden still awaiting clarity from the battleground states expected to decide the election, investors were returning to the core setting of the past decade: buying stocks with the flood of extra monetary stimulus coursing through the financial system.

Shares of technology mega-caps including Apple Inc, Amazon.com Inc and Alphabet Corp, this year's big "stay-at-home" gainers from coronavirus lockdowns, also looked set to add to strong gains from Wednesday.

The VIX volatility index, which has risen in recent months as investors feared the vote might spark falls in shares, retreated to its lowest in three weeks.

‘ In many ways the best news for markets‘

"The outcome of the election in terms of the potential for a Democratic President and a Republican Senate is in many ways the best news for markets because it prevents more extreme policies," said Jonathan Bell, chief investment officer at Stanhope Capital.

Biden had edged closer to victory in the race for the White House on Thursday after winning Michigan and Wisconsin, but Democrats appeared unlikely to win the Senate, potentially making it difficult for a Democrat administration to rein in Big Tech and other businesses.

Renewable energy, infrastructure, marijuana and trade-sensitive stocks, which analysts have identified as winning under a Biden administration, all edged higher after underperforming in the previous session.

But investors also sought the safety of bonds as the prospect of a divided Congress dented expectations of a bumper fiscal stimulus package that is critical to supporting a damaged U.S. economy. Coronavirus risks also grew with new U.S. infections setting a daily record. [US/]

Trump has alleged fraud in the election without providing evidence, filed lawsuits and called for recounts, raising the risk of weeks of partisan conflict.

Attention later in the day will be on the Federal Reserve's latest policy statement after a two-day meeting, but with the final result of the election still uncertain, the central bank is expected to repeat its pledge to do whatever it can to help the economy.