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Amy Wu Silverman, managing director and equity derivatives strategist at RBC Capital Markets, examines market volatility related to the election. Video Elephant

Stocks extended gains for a second day before Tuesday’s election on hopes that a win by Democratic presidential challenger Joe Biden and a Senate that flips to Democratic control would mean a bigger relief package for Americans financially wracked by the COVID-19 pandemic.

“There seems to be a very high likelihood of a Democratic Senate,” says Chris Zaccarelli, chief investment officer of Independent Advisor Alliance.

The Dow Jones industrial average jumped 554.98 points, or 2.1%, to close at 27,480.03. The Standard & Poor’s 500 index rose 1.8% to end at 3,369.16.

Which party controls the Senate will probably be more critical to the size of any relief measure than whether Biden or President Donald Trump is in the White House, Zaccarelli says. Senate Republicans, he says, have stood in the way of more robust aid. Though a Biden victory could mean more federal assistance, Trump has shown a willingness to provide a sizable package.

Lawmakers have been stalled for months over the legislation. The Democratic-controlled House passed a $2.2 trillion measure in September, and Senate Republicans pushed a $500 billion package. The White House proposed a $1.8 trillion bill in a last-ditch effort to reach a deal before the election, but it’s unclear whether Senate Republicans would go along.

Any package would provide more relief for unemployed Americans, struggling businesses and financially stressed states and cities.

“What investors care about is getting a stimulus package into the hands of the American people,” Zaccarelli says, noting the money is needed to support consumer spending and the economy after a $600 weekly federal supplement to jobless benefits expired in late July.  

The S&P 500 index fell 5.6% last week on a surge in coronavirus cases but rose 1.2% Monday as hopes built that the election could resolve the impasse on coronavirus relief.

The last two days of gains for Wall Street have helped the S&P 500 recover roughly half its 5.6% loss from last week, which was its worst since the market was plunging in March.

“The markets are neither red nor blue and today they’re decidedly green,” said Rod von Lipsey, managing director at UBS Private Wealth Management. “There’s a sense that we might get some clarity on the outcome of the direction of one or two wild cards that have been moving the market.”

The yield on the 10-year Treasury rose to 0.87% from 0.84% late Monday.

In European stock markets, France’s CAC 40 rose 2.4%, and Germany’s DAX returned 2.6%. The FTSE 100 in London gained 2.3%.

In Asia, South Korea’s Kospi rose 1.9%, Hong Kong’s Hang Seng gained 2% and stocks in Shanghai climbed 1.4%.

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Where does the U.S. stimulus money come from? Here’s how the Federal Reserve is saving the economy from the COVID-19 crisis. USA TODAY

Contributing: The Associated Press

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