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By Sunny Oh and Andrea Riquier

Bond market closed due to Columbus Day, or Indigenous Peoples’ Day, observed on Monday but most other markets are open

The rally in U.S. stock-market benchmarks gained steam Monday as investors bought technology giants and shifted their focus to corporate earnings starting this week . The moves come against the backdrop of the looming U.S. presidential election and stalled talks for another round of coronavirus stimulus.

Meanwhile, the bond market is closed (link) on Monday in observance of the Columbus Day holiday, also celebrated by many as Indigenous Peoples’ Day.

The Dow Jones Industrial Average rose 330 points, or 1.2%, to 28,917, supported by gains in Apple Inc. (AAPL) and Microsoft Corp. (MSFT) The S&P 500 added 67 points, or 1.9%, to 3,544, while the Nasdaq Composite climbed 342 points, or 3%, to 11,921.

On Friday (link), the Dow posted a 3.3% weekly gain, representing the sharpest weekly rise since Aug. 7. The S&P 500ose 3.8% over the period and the Nasdaq Composite rallied by 4.6%. The S&P 500 and the Nasdaq posted their best weekly percentage gains since the period ended July 2, according to FactSet.

With less than three weeks to the presidential election, investors are now focusing on the outlook for the Democratic party controlling both the White House and Congress.

Though analysts initially viewed a Democratic victory as a thorn to further equity gains, market participants argue a large stimulus package could be in the cards next year if former Vice President Joe Biden, who has a large lead over Republican incumbent Donald Trump in the polls, presided over a landslide win in the November elections.

“In the past two weeks this narrative has completely flipped, to the point where investors now view a Blue Wave as being a catalyst for a reflation trade,” said Solita Marcelli, Americas chief investment officer at UBS Global Wealth Management, in a note.

Don Calcagni, chief investment officer with Mercer Advisors, agrees. “The technology sector(XLK) is doing well today, rather than value(VOOV), and that’s indicative of the fact that the market is not expecting a stimulus package before the election,” he said in an interview.

Calcagni believes the economy should be able to hold out a few more months without additional fiscal aid, (link) but calls the first and second quarters of 2021 more of a question mark — especially given questions about vaccine availability and delivery.

“I think where the market wants and needs to go is toward lower-priced value and higher-quality stocks,” he said.

Read: Stocks are rallying because fears of a contested election are fading (link)

Prospects for another fiscal stimulus package appeared to dim (link), as Democrats over the weekend rejected a $1.9 trillion proposal from Treasury Secretary Steven Mnuchin, representing the Trump administration’s most generous aid proposal thus far.

“This past week, the president demonstrated very clearly that he has not taken the war against the virus seriously, personally or nationally. This attitude is reflected in the grossly inadequate response we finally received from the administration on Saturday,” wrote Democratic House Speaker Nancy Pelosi wrote in a Sunday letter. “Until these serious issues are resolved, we remain at an impasse.”

During an interview with Fox News, President Donald Trump cast Pelosi as a point of resistance in getting additional help for out-of-work Americans and troubled businesses. “Republicans want to do it. We’re having a hard time with Nancy Pelosi,” he said Sunday.

On-again-off-again negotiations over additional stimulus have been one of the main catalysts for the markets over the past few months.

A lack of fresh aid is forcing investors to turn to the next round of corporate earnings and the elections.

Read:Financial markets have waited patiently for a stimulus package — that might change soon (link)

S&P 500 companies’ overall earnings performance are expected to be less-bad than the second quarter, when earnings fell the most since the 2008 financial crisis, according to FactSet data.

The aggregate blended year-over-year growth estimate per share, which includes some earnings already reported and the average analyst estimates of coming results, is for a negative 20.5% as of the end of last week, following a 31.4% plunge in the second quarter.

Investors may be more focused on the rate of change in the decline, rather than how far earnings are falling, MarketWatch’s Ciara Linnane and Tomi Kilgore report (link).

Separately, the spread of the COVID-19 pandemic in Europe was forcing some reimplementation of lockdown measures. U.K. Prime Minister Boris Johnson was expected to outline the restrictions in a statement to the public on Monday (link).

In Asia, China’s equity market were ebullient on optimism that President Xi Jinping is planning to further open parts of the economy to outside investment.

Mainland Chinese stocks jumped (link), with the Shanghai Composite rising 2.6%. Japan’s Nikkei 225 index fell 0.3%, while Hong Kong’s Hang Seng Index gained 2.2%.

The pan-European (link) Stoxx 600 Europe Index was up 0.7%. London’s FTSE 100 gained 0.2%.

The yield on the 10-year Treasury note was unchanged at 0.779%. Bond yields move inversely to prices.

Oil futures (link) fell $1.33, or 3.3%, to $39.27 a barrel on the New York Mercantile Exchange. Gold(ABX.T) was virtually flat at $1,926 an ounce on Comex (link).

The ICE U.S. Dollar Index, a measure of the greenback against its major rivals, was virtually flat.

-Sunny Oh; 415-439-6400;


(END) Dow Jones Newswires

10-12-20 1517ET

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