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Stocks Climb, Treasuries Drop as Georgia Votes

Stocks rose and bonds dropped amid key elections in Georgia that should choose which party controls the U.S. Senate for the next 2 years, setting the scope of President-elect Joe Biden’s agenda.

In a time marked by thin trading volume, the S&P 500 rebounded after suffering its worst start to a year after 2016. Energy shares surged as oil traded near $50 a barrel, even though the Russell 2000 Index of smaller businesses jumped 1.7 %. With marketplaces factoring in a much better chance of a Democratic sweep in Congress, some analysts see the potential for heightened volatility. In anticipation to the end result of the Georgia vote, which will probably be identified on Wednesday, Treasury yields climbed — with a key curve measure reaching its steepest level in four years. The dollar slipped to probably the lowest since February 2018.

Whether or not Wall Street is getting much more at ease with the idea of Democrats taking control of both chambers of Congress, the scenario implies the possibility of a more generous stimulus package. Which could potentially result in upward pressure on inflation and rates along with higher taxes to spend on fiscal tool. Alternatively, must possibly Republican incumbent win re-election, the party will have enough 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 in this sector, Tom Essaye, a former Merrill Lynch trader which created The Sevens Report newsletter, wrote to a note to clients. We’d seem to buy on any sort of material dip, though we must brace for more volatility going forward if that is the final result from today’s election.

Meanwhile, President Donald Trump failed once again to invalidate the election loss of his of Georgia and let the state’s Republican-led legislature to declare him the winner — the newest courtroom defeat of his in a quixotic effort to remain in office even with losing the Nov. 3 vote.

Another news development that caught investors attention was the brand 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 express his disapproval, based on 2 people accustomed to the issue. Several U.S. officials said the move marks a short-term reprieve, not an indicator that tensions between Beijing and Washington are actually easing.

Somewhere else, Saudi Arabia surprised the oil market with a large decrease in the output of its for March as well as February, carrying a greater burden of OPEC cuts while some other makers hold steady or make modest increases.

What to watch this week:

U.S. Congress meets counting electoral votes and declare the winner of the 2020 Presidential election Wednesday.
FOMC mins out Wednesday.
U.S. unemployment report for December is due Friday.
These’re some of the key movements in markets:

Stocks
The S&P 500 Index rose 0.7 % as of 4 p.m. New York time.
The Stoxx Europe 600 Index declined 0.2 %.
The MSCI Asia Pacific Index climbed 1.1 %.

Currencies
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.

Bonds
The yield on 10-year Treasuries rose four basis points to 0.95 %.
Germany’s 10-year yield jumped three basis points to -0.58 %.
Britain’s 10 year yield climbed four basis points to 0.209 %.

Commodities
West Texas Intermediate crude surged 4.9 % to $49.93 a barrel.
Gold rose 0.3 % to $1,948.17 an ounce.

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