US stocks rise as Biden eyes control of Senate after Georgia vote

Financial shares hit a one-year high in the US.

US stocks rose, with the Dow and the S&P 500 notching record highs, as investors piled into financial and industrial stocks on bets that a Democratic sweep in Georgia would lead to more fiscal stimulus and infrastructure spending.

Financial shares hit a one-year high, while materials, industrial and energy sectors jumped and rate-sensitive bank shares leaped about 5%.

However, increased risk of competition scrutiny of Big Tech companies pressured shares of Apple, Microsoft, Amazon, Google, and Facebook. Tesla was the only major technology stock trading higher.

Democrats won one US Senate race in Georgia and led in another, moving closer to a surprise sweep in a former Republican stronghold that would give them control of Congress and the power to advance president-elect Joe Biden’s policy goals. 

“The market is saying we can deal and live with this political decision,” said John Stoltzfus, chief investment strategist at Oppenheimer Asset Management in New York.

“It is saying if you have the potential to lose the tax reform package ... the offset to that might be more stimulus to the economy which in effect could be positive for the markets,” he said.

Analysts generally assume a Democrat-controlled Senate, which could usher in increased fiscal spending while raising the chances of tax hikes and tougher regulation, would be a net positive for economic growth globally and thus for most risk assets.

The Russell 1000 value index, which is heavily weighted toward cyclical sectors, rose 2.5%, while the growth index, with a large tech company weighting, fell slightly. The small-cap Russell 2000 index jumped 2.5% to a record high. 

• Reuters