(Bloomberg) – US stocks completed their biggest two-day rally since September, led by a surge in bank stocks as government bond yields rose amid speculation that Congress will come up with a spending bill after the election. The dollar weakened and crude oil rose.
The S&P 500 was up 1.8%, taking the two-day gain to 3.2%. Financial companies rose 2.2%, also the strongest since September. Democratic candidate Joe Biden leads President Donald Trump in recent polls. Some investors speculate that his win would drive federal spending up. Meanwhile, US-traded shares of Alibaba Group Holding Ltd. fell. by 8.1% after China stopped the IPO of Ant Group Co., in which Alibaba holds around a third of the shares.
Treasuries fell and the dollar fell the hardest in more than three weeks amid risky sentiment. Oil gains after jumping Monday on mounting signs of OPEC + will delay a planned easing of production cuts.
“It’s a reflection of the market’s belief that there won’t be much uncertainty after Election Day,” said Matt Stucky, equity portfolio manager at Northwestern Mutual Wealth Management Co. “The worst result for Election Day is really uncertain.” Winning scenario in which it will take weeks and a lot of legal back and forth before the final decision is made. “
While trades that reflect a democratic swing have remained firm, the betting markets are not convinced. A measuring device slipped to just over 50% of the chances of the so-called blue wave – that Democrats oust President Trump and take over the majorities in Congress. Traders hedged the prospect of post-vote volatility, pushing a measure of the Chinese yuan’s expected volatility to its highest level in more than nine years.
“The spirit of 2016 is great based on both surveys and market expectations,” Michael Purves, CEO of Tallbacken Capital Advisors, wrote in a note.
Elsewhere, the credit derivatives benchmark index measures the perceived risk of US high yield companies that have risen the most in nearly two months, implying a lower probability of default.
Markets are reflecting more optimism after weeks of speculation that a controversial election result might not produce a clear winner for some time and upset the markets. Polls continue to show that Biden is ahead of the game, although the race looks tight in some battlefield states, some of which are skyrocketing virus cases.
“The upward tilt of the market and underlying leadership in the energy, industrial and raw materials sectors imply a blue wave that recognizes the potential for economic and infrastructure spending to pass on,” said Sam Stovall, CFRA Research’s chief investment strategist.
In Europe, mining stocks rose, aided by the falling dollar. Banks rebounded after BNP Paribas SA, along with its European counterparts, set up less-than-expected provisions for bad loans from the pandemic.
Here are some key events:
EIA Crude Oil Inventory Report Wednesday. Decision on Fed policy on Thursday. The top non-farm payroll report in the US is due on Friday. Income this week will come from companies like Alibaba Group Holding Ltd., AstraZeneca Plc, Nintendo Co., Macquarie Group Ltd. . and Toyota Motor Corp.
Here are some of the most important steps to take in financial markets:
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