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Stocks Climb, Treasuries Drop as Georgia Votes

Stocks rose and bonds dropped amid key elections in Georgia that could decide 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 slim trading volume, the S&P 500 rebounded after suffering its worst start to a season since 2016. Energy shares surged as oil traded near $50 a barrel, while the Russell 2000 Index of smaller companies jumped 1.7 %. With marketplaces factoring in an even greater chance of a Democratic sweep in Congress, several analysts see the potential for heightened volatility. In anticipation to the outcome of the Georgia vote, which will likely be identified on Wednesday, Treasury yields climbed — with an important curve measure reaching the steepest level of its in four seasons. The dollar slipped to the lowest since February 2018.

Whether or perhaps not Wall Street is becoming a lot more at ease with the idea of Democrats taking control of both chambers of Congress, the scenario seems to indicate the possibility of a more generous stimulus package. Which could potentially lead to upward pressure on inflation as well as rates as well as higher taxes to pay for fiscal aid. Alternatively, must possibly Republican incumbent win re election, the party would have sufficient votes to block any Biden initiative.

We don’t 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 in a note to clients. We would seem to buy on any material dip, however, we should brace for even more volatility going forward when that is the end result from today’s election.

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

Another news development that caught investors interest 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 express his disapproval, according to two people accustomed to the issue. Many U.S. officials said the move marks a temporary reprieve, not really a sign that tensions between Washington and Beijing are actually easing.

Somewhere else, Saudi Arabia surprised the oil market with a big decrease in the output of its for March as well as February, carrying a much better burden of OPEC cuts while other producers hold steady or even make small increases.

What to watch this week:

U.S. Congress meets to count electoral votes and declare the winner of the 2020 Presidential election Wednesday.
FOMC minutes out Wednesday.
U.S. unemployment report for December is actually due Friday.
These are some of the principle 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 gained 0.4 % to $1.2291.
The Japanese yen appreciated 0.4 % to 102.74 per dollar.

Bonds
The yield on 10 year Treasuries rose 4 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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