Market volatility picked up as Election Day neared. Former Vice President Joe Biden has enjoyed a lead in the polls, but President Donald Trump has indicated he would contest a close election through legal battles in swing states.
A closely watched gauge of US manufacturing-industry growth climbed at its fastest rate in two years. The index gained to 59.3 in October from 55.4, beating economists’ estimates of 56.
US stocks jumped on Monday as investors cheered better-than-expected economic data and braced for the US presidential election on Tuesday.
Energy, industrial, and materials stocks led the market’s upswing from its worst week since March. Tech stocks hobbled to a meager one-day gain as investors continued to shun disappointing earnings results from mega-cap names.
Cboe’s VIX index — Wall Street’s preferred gauge of market volatility — fluctuated at slightly elevated levels as investors finalized their Election Day strategies. The results, particularly in Senate races, could determine whether fiscal stimulus is enacted early next year.
While former Vice President Joe Biden has enjoyed a lead in the polls, President Donald Trump could pull off the same kind of surprise victory as he did four years ago. Any contested results and legal battles would almost surely fuel choppy price action and further volatility.
Here’s where US indexes stood at the close on Monday:
“With one day to go until the presidential election, the stock market will undoubtedly take a wait and see attitude, with traders apprehensive about disputed election results,” said Marc Chaikin, the founder of the quantitative research firm Chaikin Analytics.
The first major economic-data release of the month supported arguments that the US recovery remains strong. The Institute for Supply Management’s gauge of manufacturing activity jumped to 59.3 in October from 55.4, its fastest rate of expansion since 2018. Readings above 50 indicate industry growth. Economists surveyed by Bloomberg had expected the gauge to reach 56.
“Manufacturing’s recovery is much more advanced than services, but we expect factory activity to face challenges from the slowing domestic recovery and weaker external demand without the crutch of generous fiscal support,” Oren Klachkin, the lead US economist at Oxford Economics, said in a note.
As if US elections weren’t enough for investors, the Federal Reserve’s Open Market Committee is set to meet on Wednesday and Thursday to further discuss its policy response to the coronavirus recession. The group is largely expected to keep interest rates at historic lows. Federal Reserve officials have hinted that the central bank could increase its pace of asset purchases from $120 billion a month to further support the economic recovery.
More than 74,000 new COVID-19 cases were reported in the US on Sunday, and the US death toll passed 230,000 over the weekend. With England joining Germany and France in instituting partial lockdowns, some fear the US will take similar steps to prevent the virus’ spread.
Monday’s gains retraced some of last week’s hefty losses. Markets tanked through the end of October as soaring COVID-19 cases and disappointing tech earnings prompted sell-offs. The Dow sat mired in correction territory, while the S&P 500 and the Nasdaq followed close behind.
Dunkin’ Brands surged after agreeing to an $11.3 billion acquisition by Inspire Brands. The deal — among the biggest in the restaurant industry — would take Dunkin’ private at $106.50 per share, a 20% premium from its October 23 closing price.
Bitcoin surged as high as $13,877.48 on Sunday before hovering at about $13,400 on Monday morning. The weekend rally reignited momentum that faded through last week’s gloomy sessions.
Spot gold gained as much as 0.9%, to $1,895.41 per ounce. The US dollar gained against a basket of peer currencies, and Treasury yields dipped.
Oil futures rebounded after touching five-month lows earlier in the day. West Texas Intermediate crude jumped as much as 3.6%, to $37.09 per barrel. Brent crude, oil’s international standard, surged 4.9%, to $39.28 per barrel, at intraday highs.
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