Stocks rose and bonds dropped amid important elections in Georgia that will decide which party controls the U.S. Senate for the next two years, setting the scope of President-elect Joe Biden’s agenda.
In a time marked by slim trading volume, the S&P 500 rebounded after suffering its worst start to a year after 2016. Energy shares surged as oil traded near fifty dolars a barrel, while the Russell 2000 Index of smaller companies jumped 1.7 %. With markets factoring in a greater chance of a Democratic sweep in Congress, some analysts see the potential for heightened volatility. In anticipation to the result of the Georgia vote, which will probably be recognized on Wednesday, Treasury yields climbed — with a key curve measure reaching the steepest level of its in four years. The dollar slipped to the lowest since February 2018.
Whether or not Wall Street is getting much more at ease with the thought of Democrats taking control of both chambers of Congress, the scenario seems to indicate the possibility of a more generous stimulus program. Which could likely cause upward pressure on inflation and rates in addition to higher taxes to spend on fiscal tool. Conversely, should either Republican incumbent win re-election, the party would have sufficient votes to block any Biden initiative.
We do not view a Democrat Senate as a bearish game changer in the short term because there’d still be a lot of positives of this sector, Tom Essaye, a former Merrill Lynch trader who developed The Sevens Report newsletter, wrote in a note to clients. We’d seem to purchase on virtually any components dip, although we need to brace for more volatility going forward if that’s the final result at today’s election.
Meanwhile, President Donald Trump failed again to invalidate his election loss in Georgia and allow the state’s Republican led legislature to declare him the winner — the latest courtroom defeat of his in a quixotic effort to remain in office even with losing the Nov. three vote.
Another information growth which caught investors attention was the new York Stock Exchange’s surprise decision to spare 3 leading Chinese telecommunications companies from being delisted. Treasury Secretary Steven Mnuchin called NYSE Group Inc. President Stacey Cunningham to voice the disapproval of his, based on 2 people acquainted with the matter. Several U.S. officials said the move marks a momentary reprieve, not really an indication that tensions between Washington and Beijing are actually easing.
Somewhere else, Saudi Arabia surprised the oil market with a major decline in its output for March and February, carrying a greater burden of OPEC cuts while other makers hold steady or perhaps make little increases.
What you should view this week:
U.S. Congress meets counting electoral votes and declare the winner of the 2020 Presidential election Wednesday.
FOMC mins through Wednesday.
U.S. unemployment report for December is due Friday.
These’re several of the main moves in markets:
The Bloomberg Dollar Spot Index sank 0.5 %.
The euro received 0.4 % to $1.2291.
The Japanese yen appreciated 0.4 % to 102.74 per dollar.
The yield on 10 year Treasuries rose 4 basis points to 0.95 %.
Germany’s 10 year yield jumped 3 basis points to 0.58 %.
Britain’s 10-year yield climbed four basis points to 0.209 %.
West Texas Intermediate crude surged 4.9 % to $49.93 a barrel.
Gold rose 0.3 % to $1,948.17 an ounce.