Stocks soar as investors expect Democratic wins
Optimism helps the Dow increase 550 points, and oil markets have their best day in aweek
U.S. markets rose on Election Day as investors expressed optimism that a clear winner would emerge in the presidential race, fanning hopes for economic stimulus.
Even oil markets, which have been choppy as renewed movement restrictions spur fears of wider lockdowns, rose to the highest in a week.
Tumult reigned in trading last week, with U.S. indexes having their worst week since March as the U.S. shattered records for new coronavirus cases and several European nations reintroduced lockdowns. But on Tuesday, the markets built on Monday’s gains as upbeat investors react to projections of a blue wave, said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
“Currently, the consensus is that a blue wave scenario (Democrats hold the House and win the Senate and the White House) will lead to a much larger stimulus package next year,” Zaccarelli wrote, “which would be good for the stock market in the short run, despite the fact that it will also lead to higher corporate and personal income taxes.”
After rising 300 points at opening, the Dow Jones Industrial Average closed the day up more than 550 points, slightly more than 2 percent, at 27,480. The S&P 500 index closed up1.8 percent at 3,369. The tech-heavyNasdaq100 — batteredby the recent steep selloffs in Big Tech — rose 1.9 percent to 11,160.
The optimismwas shared overseas. Asian markets all closed in positive territory, with Hong Kong’s Hang Seng index and the Australian ASX 200 both gaining nearly 2 percent. Japan’s Nikkei 225 and the Shanghai Composite
index both climbed about 1.4 percent. In midday trading, European indexes were all positive, led by France’s CAC and Britain’s FTSE 100, which were both up more than 2.3 percent.
“It’s a firm risk-on mood for investors as equities rise across Europe and Asia,” Russ Mould, investment director at AJ Bell, said Tuesday. “Investors seem to be pricing in a victory by Joe Biden in the U.S. presidential election, and anticipation is high that he will have a more favorable trade policy with China and the EU.”
Also Tuesday, Chinese regulators announced the suspension of financial tech giant Ant Group’s $37 billion public offering, which was scheduled for Thursday and was expected to be the world’s biggest IPO. In a statement, the Shanghai stock exchange cited “major issues” that might cause it “not tomeet the listing conditions or disclosure requirements” after a meeting with Jack Ma, the company’s billionaire co-founder. Ant
Group is the financial arm of ecommerce giant Alibaba.
Investor ease was reflected in the yield on the 10-year U.S. Treasury note, which edged up to 0.888 percent Tuesday morning, nearing its highest level since June as investors seek out riskier territory. Bond yields move inversely to prices.
Oil extended Monday’s gains,
alongside the broad market rally, drawing support from signs that OPEC+ may delay a planned output increase as well as expectations for a drop in U.S. crude supplies.
OPEC and its allies will “accelerate” the recovery in oil markets at their next meeting, the group’s top official said, in another hint about a potential delay to a pro
duction hike scheduled for January. Algeria — along with Saudi Arabia, Russia and Iraq — said it’s trying to persuade the rest of OPEC+ to extend current supply cuts, state-run news agency APS reported.
“This big sell-off last week was a wake-up call to the OPEC+ group,” said John Kilduff, a partner at Again Capital. “The renewed shoulder-to-the-wheel-type of action that appears to be emerging is helping to support prices.”
Americans were voting in a presidential election that could reshape U.S. policy on a slew of energy-related areas such as fracking and how to address climate change. All the while, a swiftly evolving coronavirus situation in Europe is raising new threats to oil’s spotty demand recovery. Demand is recovering “at a very slow speed,” according to the Organization of the Petroleum Exporting Countries SecretaryGeneral Mohammad Barkindo.
“All eyes will be on the U.S. election today and tomorrow,” said Bjarne Schieldrop, chief commodities analyst at SEBAB. Onthe possible change of course by
OPEC+, he said it would be “a relief for themarket if it did not have to worry about an additional 1.9 million barrels a day of supply coming.”
Brent crude, the international oil benchmark, was trading up 2.67 percent at $40.01 per barrel. West Texas Intermediate crude, the U.S. oil benchmark, rose 1.5 percent to $38.23 per barrel.
Chris Rupkey, chief financial economist at MUFG Union Bank, said Tuesday that the broad markets rally reflects a hunger for change amid the ongoing public health crisis and the uneven economic recovery.
“History is repeating itself where four years ago, the Dow industrials rallied Monday and Tuesday into the presidential election on Nov. 8, and now stocks are up Monday and Tuesday again this year before the election results start to trickle out after the close of trading today,” Rupkey said. “Stocks are rallying today in hopes of a better tomorrow.”