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Stocks Surge on Political Clarity, Vaccine Hopes

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headshot of janet yellen Janet Yellen in 2017 (Credit: Bloomberg)

The Dow Jones Industrial Average topped 30,000 for the first time and investors piled into risk assets as a series of market-friendly developments unleashed animal spirits on Wall Street.

The S&P 500 hit a record, spurred by the formal start of President-elect Joe Biden’s transition, news that all but removed the threat of a contested transfer of power.

Investors also woke up with a clear sense of what Biden’s Treasury Department will have in policy preferences after he nominated Janet Yellen to the post. A third promising vaccine candidate added to the euphoria, boosting bets that the economy can soar next year.

The rotation into risk assets was widespread. Small caps in the Russell 2000 added another 1.8%, pushing its November rally past 20%. Tesla Inc. tacked on another 5% and is now worth $500 billion. Carnival Corp. jumped 10%, Planet Fitness Inc. rose 9% and MGM Resorts International added 7%.

Four stocks rose for every one that fell in the S&P 500, while only three Dow companies dropped. Bitcoin rose to a three-year high, topping $19,000 as it closed in on a record.

“Everybody’s just ecstatic with the vaccine news,” said Jerry Braakman, chief investment officer of First American Trust, in Santa Ana, California, which manages around $2 billion.

“We had to slug through the election results, there’s a sense of relief that we didn’t decay into anarchy. That was definitely holding back the economy. We know how well stock markets do with recovery and its vision ahead. That’s normally the best time for markets,” Backman explained.

Energy companies in the S&P 500 surged 4% on the back of oil’s advance past $45 for the first time since March. The dollar weakened versus major peers and Treasuries slipped. Gold fell toward $1,800 an ounce.

In other markets, gold dropped to a four-month low and the dollar weakened against its major peers.

In New Zealand, the government proposed adding home prices to the central bank’s remit to rein in an overheating property market. The move has prompted investors to reduce bets on lower interest rates, pushing the kiwi to the highest level since June 2018.

In Germany, the operator of the DAX index announced the biggest overhaul since the index’s inception in 1988. The number of members will increase to 40 from 30 and new quality criteria will be imposed on both existing and prospective members.

Here are some key events coming up:

  • Minutes of the most recent Federal Open Market Committee meeting are due Wednesday.
  • U.S. jobless claims, GDP and personal spending data come Wednesday.
  • U.K. expected on Wednesday to deliver the government’s spending plans for next year.
  • Thursday sees a policy decision and briefing from the Bank of Korea.
  • U.S. celebrates the Thanksgiving holiday on Thursday.
  • The week ends with Black Friday, the traditional start of the U.S. holiday shopping season.

These are the main moves in markets:

Stocks

  • The S&P 500 Index rose 1.5% as of 2:18 p.m. New York time.
  • The Stoxx Europe 600 Index rose 0.9%.
  • The MSCI Asia Pacific Index rose 0.9%.
  • The MSCI Emerging Market Index was little changed.

Currencies

  • The Bloomberg Dollar Spot Index fell 0.3%.
  • The euro climbed 0.2% to $1.187.
  • The British pound gained 0.1% to $1.3333.
  • The onshore yuan was little changed at 6.586 per dollar.
  • The Japanese yen was little changed at 104.54 per dollar.

Bonds

  • The yield on 10-year Treasuries jumped two basis points to 0.87%.
  • The yield on two-year Treasuries increased less than one basis point to 0.16%.
  • Germany’s 10-year yield gained three basis points to -0.56%.
  • Japan’s 10-year yield climbed one basis point to 0.025%.

Commodities

  • West Texas Intermediate crude surged 4.7% to $45.07 a barrel.
  • Brent crude climbed 1.6% to $47.845 a barrel.
  • Gold futures weakened 1.9% to $1,809.30 an ounce.

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