US stocks climb as treasury bills fall amid Senate race
Stocks rose and bonds fell amid key Georgia elections that will decide which party will control the U.S. Senate for the next two years, defining the scope of President-elect Joe Biden’s agenda.
In a session marked by low trading volume, the S&P 500 rebounded after suffering its worst start to the year since 2016. Energy stocks surged as oil traded near US $ 50 on barrel, while the Russell 2000 Index of Small Businesses jumped 1.7%. With the markets factoring in a greater chance of a Democratic sweep in Congress, some analysts see the potential for volatility. In anticipation of the outcome of the vote, which will likely be released on Wednesday, Treasury yields have climbed – with a key measure of the curve hitting its highest level in four years. The dollar slipped to its lowest since February 2018.
Whether or not Wall Street is more comfortable with the idea of Democrats taking control of both houses of Congress, the scenario implies the possibility of a more generous stimulus package. This could potentially lead to upward pressure on inflation and interest rates as well as higher taxes to pay for tax assistance. Conversely, if either of the incumbent Republicans won re-election, the party would have enough votes to block any Biden initiative.
“We don’t see a Democratic Senate as a short-term bearish game changer because there would still be a lot of bright spots in this market,” wrote Tom Essaye, a former Merrill Lynch trader who founded the “The Sevens” newsletter. Report “. in a note to customers. “We would look to buy if there is a big drop, but we should be prepared for more volatility in the future if that is the outcome of today’s election.”
Meanwhile, President Donald Trump has failed to overturn his electoral defeat in Georgia again and allow the Republican-led legislature to declare him the winner – his latest defeat in court in a pipe-dreaming effort to stay in court. power despite the loss of the November 3 vote.
Another novelty that caught the attention of investors on Tuesday was the surprise decision by the New York Stock Exchange to avoid delisting three major Chinese telecommunications companies. Treasury Secretary Steven Mnuchin called NYSE Group Inc. President Stacey Cunningham to express his disapproval, according to two people familiar with the matter. Several US officials said the move marked a temporary reprieve and not a sign that tensions between Washington and Beijing were easing.
Elsewhere, Saudi Arabia surprised the oil market with a sharp cut in production in February and March, bearing a greater burden of OPEC + cuts while other producers hold on or make small increases.
What to watch this week:
- The US Congress meets to count the electoral votes and declare the winner of the 2020 presidential election on Wednesday.
- FOMC report Wednesday.
- The US unemployment report for December is due on Friday.
Here are some of the main movements in the markets:
- The S&P 500 Index rose 0.7 percent at 4 p.m. New York time.
- The Stoxx Europe 600 index fell 0.2%.
- The MSCI Asia Pacific Index climbed 1.1%.
- The Bloomberg Dollar Spot Index fell 0.5%.
- The euro gained 0.4 percent to US $ 1.2291.
- The Japanese yen appreciated 0.4 percent to 102.74 per dollar.
- The yield on 10-year Treasuries rose four basis points to 0.95 percent.
- Germany’s 10-year yield jumped three basis points to -0.58 percent.
- Britain’s 10-year yield climbed four basis points to 0.209 percent.
- West Texas Intermediate crude jumped 4.9 percent to US $ 49.93 a barrel.
- Gold rose 0.3% to US $ 1,948.17 an ounce.
– With the help of Andreea Papuc, Cecile Gutscher, Yakob Peterseil, David Wilson, Nancy Moran and Sophie Caronello.