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Stocks Climb, Treasuries Drop as Georgia Votes

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

In a consultation marked by slim trading volume, the S&P 500 rebounded after suffering its worst start to a year since 2016. Energy shares surged as oil traded near $50 a barrel, while the Russell 2000 Index of smaller businesses jumped 1.7 %. With markets factoring in a much better chance of a Democratic sweep of Congress, several analysts see the potential for heightened volatility. In anticipation to the end result of the Georgia vote, that will probably be known on Wednesday, Treasury yields climbed — with a vital 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 becoming more at ease with the notion of Democrats taking control of both chambers of Congress, the scenario implies the risk of a more generous stimulus program. That might likely lead to upward pressure on inflation as well as rates along with higher taxes to pay for fiscal aid. Conversely, should either Republican incumbent win re election, the party will have enough votes to block some Biden initiative.

We don’t view a Democrat Senate as a bearish game changer in the short term because there’d still be a great deal of positives of this market, Tom Essaye, a former Merrill Lynch trader which founded The Sevens Report newsletter, wrote to a note to clients. We’d appear to buy on any sort of components dip, although we must brace for more volatility going forward if that’s the outcome at 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 despite losing the Nov. 3 vote.

Another info growth that caught investors interest was the new York Stock Exchange’s surprise decision to spare three leading Chinese telecommunications companies from being delisted. Treasury Secretary Steven Mnuchin called NYSE Group Inc. President Stacey Cunningham to voice his disapproval, according to two people familiar with the issue. Many U.S. officials said the move marks a temporary reprieve, not a sign that tensions between Beijing and Washington are easing.

Somewhere else, Saudi Arabia surprised the oil market with a major decrease in its output for February and March, carrying a much better burden of OPEC cuts while some other producers hold steady or even make little 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 due Friday.
These are several of the key moves 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 a 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 4 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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