United States stocks surged as a gust of optimism swept through global equity markets as millions of Americans headed to vote. The U.S. dollar weakened, yields rose and crude oil increased by the most in a month.
The S&P 500 jumped more than 2% amid growing bets that banks and oil companies are among sectors poised for gains after the election. The benchmark index has swung more than 1% in six of the past seven trading sessions.
Meanwhile, Alibaba Group Holding Ltd.’s U.S.-traded shares tumbled as much as 9.7% after China halted the initial public offering of Ant Group Co., in which Alibaba owns about a one-third stake.
Treasuries fell and a gauge of the dollar dropped the most in three weeks as risk-on mood prevailed. Oil extended gains after jumping on Monday on increasing signs OPEC+ will delay a planned easing of output cuts.
“It’s a reflection of the market’s belief there is not going to be a whole lot of uncertainty after election day,” said Matt Stucky, portfolio manager for equities at Northwestern Mutual Wealth Management Co. “The worst outcome for election day is a really uncertain winner scenario where it’s going to take weeks and a lot of legal back and forth before the decision is ultimately made.”
While trades reflecting a Democratic sweep held firm, betting markets aren’t convinced. One gauge slipped to just over 50% odds of the so-called Blue Wave — that Democrats oust President Donald Trump and take Congressional majorities. Traders hedged prospects of post-vote volatility, driving a measure of expected swings in China’s yuan to its highest level in more than nine years.
Elsewhere, the benchmark credit derivatives index measuring the perceived risk of U.S. high-yield companies gained by the most in almost two months, implying lower probability of default.
Markets are reflecting more optimism following weeks of speculation that a contested election outcome may produce no clear winner for some time and roil markets. Polls continue to indicate that Democratic nominee Joe Biden is ahead, though the race looks tight in some battleground states, some of which are seeing virus cases soar.
“The market’s upward bias, and underlying leadership of energy, industrials, and materials sectors, imply a Blue wave that incorporates the potential for the passage of stimulus and infrastructure spending bills,” said Sam Stovall, chief investment strategist at CFRA Research.