Stocks zoom higher as Wall Street predicts Joe Biden will win

Stocks started the day off with a bang in New York, retracing some of their losses from last week, when they recorded their worst week since March.
The Dow (INDU) climbed 1.3%, or 350 points, at the opening bell. The broader S&P 500 (SPX) rose 1.1%, and the Nasdaq Composite (COMP) opened up 0.9%.
Although stocks typically favor Republican policies, investors are eager for more fiscal stimulus, that will buoy an economy headed south once again as coronavirus cases soar. Investors predict a “blue wave” would lift the chances of a comprehensive stimulus deal getting passed in the winter.

A Biden win would also likely mean less news and headline risk for stocks in the term to come, investors believe.

“If the polls are roughly right, Joe Biden is going to win the election comfortably and we will know that before midnight tomorrow,” said Andy Laperriere and Don Schneider at Cornerstone Macro.

Even if not the polls are wrong, the evidence is still pointing to a Biden victory, they added. Prediction market PredictIt puts a Biden win at 65%.

“We have been emphasizing that the Senate outcome is important for the trajectory of fiscal policy,” said Citi economist Andrew Hollenhorst in a note to clients, even though neither party is likely to get a filibuster-proof majority so bipartisan cooperation could still be needed for the next stimulus bill.

“Under any election scenario we expect a $1.5 trillion plus fiscal package, possibly as early as just post-election,” Hollenhorst said.

Congress has been stuck on negotiating a second stimulus deal since the summer. Investors have been waiting for results, getting jumpy at any headlines about the progress. What this really tells us is that markets believe the US economy needs more help getting back on track as the effects of the CARES Act are running out.

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