North American stock markets up at mid-morning despite U.S. election uncertainty

Bloomberg

U.S. Stocks, Bonds Rally as Election Bets Retooled: Markets Wrap

(Bloomberg) — U.S. stocks rallied the most since May and Treasuries surged as investors recalibrated their portfolios for a future without massive debt-fueled spending and a rollback of President Donald Trump’s signature tax cuts.The Nasdaq 100 surged more than 4% as the uncertain outcome did little to deter bulls who have already stared down a global pandemic that brought the fastest bear market on record. While the presidential vote outcome is delayed and Trump has threatened to contest the result, traders are speculating that he won’t touch off a protracted legal battle.“Wall Street’s positive response to the yet-to-be-decided election implies that investors think gridlock is good,” said Sam Stovall, Chief Investment Strategist at CFRA Research.Equity indices in general, and the Nasdaq in particular, are pushing higher as the “wave” turned into a “ripple”, lessening the prospects for an increase in regulations and taxes from a Joe Biden administration. Bond prices also advanced, driving yields lower, possibly in a flight-to-safety response, but also from the diminishing of inflationary pressures from the previously expected injection of additional fiscal stimulus.Expectations that a Democratic sweep would usher in massive stimulus vanished, but traders piled into the megacap technology shares that are seen reaping the benefits of what growth there is, especially if the raging virus leads to additional restrictions. Traders are also betting on stocks that could benefit from a Congressional stalemate. That outcome makes a rollback of Trump’s signature tax less likely and dents the prospects for strict regulations on the tech companies that dominate the economy.The dwindling hope for a large spending bill deprived financial and industrial shares of the juice needed to expand profits in an economy still struggling to recover from virus lockdowns. The 10-year Treasury yield tumbled below 0.80% as traders cheered the prospects for less debt-funded spending. Traders also speculated that the Federal Reserve, long begging for fiscal support, may be forced to increase its monetary buttressing if economic data remains tepid. On Wednesday, a private payrolls report fell short of estimates and the services sector expanded at the slowest pace in five months.“Tech is doing well because the market is essentially reacting to the reality there will not be large scale stimulus coming down the line,” said Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. “At that point growth is at a premium and you’re seeing money flood into growth stocks. There was the hope that if there was a blue wave you’d see those value and cyclical stocks take off.”Reflation Bets Are Being Unwound as Traders Reel From U.S. VoteThe benchmark S&P 500 Index rose for a third day after futures swung from losses to gains during the early U.S. morning. Prices recovered from the dive they took earlier when Trump falsely claimed victory and threatened to ask the Supreme Court to intervene in the election.With millions of votes in battleground states still being counted, and close contests in five key states, the presidential outcome may not be decided for days, or longer. It’s clear that the election is turning out to be messier and more drawn-out than Wall Street had hoped.“There will be very little cooperation on fiscal policy, very little cooperation relative to policy related to containing COVID, very little cooperation on infrastructure, or basically anything that will stimulate the economy,” said George Pearkes, Bespoke Investment Group’s global macro strategist. “If that’s the case, then what we’ve got is a repeat of the last recovery, almost to the letter.”Meanwhile, Uber Technologies Inc. and Lyft Inc. jumped after California voters approved a measure to protect the companies’ business models from efforts to reclassify their drivers in the state as employees.Back in global markets, the dollar fluctuated against many of its major peers, while gold slipped. In Asia, Alibaba Group Holding Ltd. tumbled 7.5% in Hong Kong after China halted the initial public offering of Ant Group Co., in which Alibaba owns about a one-third stake.Follow along here for our real-time news updates and analysis.These are some key events coming up:Federal Reserve policy decision on Thursday.The key U.S. non-farm payrolls report is due Friday.Earnings are due this week from companies including Bristol-Myers Squibb Co., AstraZeneca Plc and Nintendo Co. on Thursday; Macquarie Group Ltd. and Toyota Motor Corp. are set for on Friday.These are some of the main moves in global financial markets:For more articles like…