Stocks Gain as Wall Street Waits on US Election: Markets Wrap

(Bloomberg) — US stocks climbed and the dollar weakened as voting got underway in a presidential race that will have major consequences for the future of economic policy. 

While markets looked relatively subdued, Wall Street was also preparing for a long night of potentially contentious ballot counting ahead and sharp swings no matter the outcome. Assets like the Mexican peso and Bitcoin, seen as some of the clearest reads on the election mood, and volatility measures for Treasuries and the S&P 500 were being closely monitored. 

“What you can see across markets now is that no one is ready to take clear investment positions on the election,” said Alexandre Hezez, chief investment officer at Groupe Banque Richelieu in Paris. “The uncertainty is palpable across all asset classes. There’s such a massive gap between the program of the two candidates that caution is of the essence.”

The S&P 500 added 0.4%. Ten-year Treasury yields rose three basis points to 4.31%. Palantir Technologies Inc. surged 14% on record profit and high demand for its artificial intelligence software. 

Wall Street’s Great Election Trades Now Face the Moment of Truth

There is a track record for stocks to do well on presidential voting day. The S&P 500 finished higher in nine of the past 11 election trading sessions in data going back to 1928, excluding some years when the NYSE was shut, according to an analysis by Carson Group. The index had an average gain of 0.9%. In the most recent example, the index posted a 1.8% advance on Nov. 3, 2020.

Still nerves on Wall Street were running high, given that it’s been one of the most dramatic and tightly contested American presidential campaigns in modern history. Goldman Sachs Group Inc. strategists said there’s a possibility of a burst of volatility in the aftermath of the election, but also pointed to the resilient US economic backdrop as likely to support equities in the long run.

The team of strategists led by Andrea Ferrario said there’s just an 18% chance of a bear market in the next 12 months — even when taking into account the risks posed by Tuesday’s presidential election. “Equities should be able to digest higher bond yields as long as they are driven by better growth,” the Goldman strategists wrote in a note. 

What David Kostin, Kevin McCarthy Are Watching as Votes Come In

Some of the attention in markets may shift later in the week to the Federal Reserve’s decision on interest rates on Thursday, and Jerome Powell’s press conference, where he’ll give details on the path for interest rates.

“The big question is, can the Fed deliver four to five cuts in 2025, or is there this fear that inflation will stop the Fed halfway through its tightening cycle?” said Ludovic Subran, chief economist at Allianz SE. The latter “will send shockwaves through the US economy.”

All of that adds up to a market primed for volatility this week. Options data suggests a 1.8% move in either direction for the S&P 500 on Wednesday, according to Citigroup’s head of equity trading strategy Stuart Kaiser. 

Key events this week:

• US trade, ISM Services index, Tuesday
• US Presidential Election, Tuesday
• Brazil rate decision, Wednesday
• New Zealand unemployment, Wednesday
• Poland rate decision, Wednesday
• Taiwan CPI, Wednesday
• Vietnam CPI, trade, industrial production, Wednesday
• ECB President Christine Lagarde speaks, Wednesday
• China trade, forex reserves, Thursday
• Eurozone retail sales, Thursday
• Mexico CPI, Thursday
• Norway rate decision, Thursday
• Peru rate decision, Thursday
• Sweden rate decision, CPI, Thursday
• UK BOE rate decision, Thursday
• US Fed rate decision, initial jobless claims, productivity, Thursday
• Brazil inflation, Friday
• Canada employment, Friday
• Chile CPI, Friday
• Taiwan trade, Friday
• US University of Michigan consumer sentiment, Friday
• Fed Governor Michelle Bowman speaks, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.4% as of 9:32 a.m. New York time
• The Nasdaq 100 rose 0.5%
• The Dow Jones Industrial Average rose 0.1%
• The Stoxx Europe 600 fell 0.2%
• The MSCI World Index rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro rose 0.3% to $1.0907
• The British pound rose 0.5% to $1.3017
• The Japanese yen rose 0.2% to 151.87 per dollar

Cryptocurrencies

• Bitcoin rose 3.9% to $69,714.45
• Ether rose 4.1% to $2,468.84

Bonds

• The yield on 10-year Treasuries advanced three basis points to 4.32%
• Germany’s 10-year yield advanced one basis point to 2.41%
• Britain’s 10-year yield advanced four basis points to 4.50%

Commodities

• West Texas Intermediate crude rose 0.9% to $72.30 a barrel
• Spot gold rose 0.4% to $2,748.09 an ounce

This story was produced with the assistance of Bloomberg Automation.

 

–With assistance from Michael Msika, Macarena Muñoz and Margaryta Kirakosian.

©2024 Bloomberg L.P.