U.S. stocks rallied amid heavy trading and Treasuries tumbled as investors reassessed the effects of Donald Trump’s surprise victory in the American presidential election.
The S&P 500 Index rose, led by health-care shares and banks, as traders unwound bets that a win by Hillary Clinton would bring stronger regulatory scrutiny. Treasuries yields topped 2 percent on wagers the Republican will ramp up spending to boost the economy. Mexico’s peso sank amid prospects the integration with the U.S. will unravel, while Russian shares jumped on speculation Trump will mend ties with Moscow. Gold and the yen pared gains.
“It’s an amazingly impressive recovery off the lows for risk assets,” said Craig Collins, managing director of rates trading at Bank of Montreal in London. “It’s very surprising given the feel the session had to start with, that it was a massive risk-off flight to quality bid.”
A Trump victory had been portrayed by analysts as having the potential to unhinge markets banking on a continuation of policies that coincided with the second-longest bull market in S&P 500 history. Going into the vote, most polls showed Democrat Hillary Clinton ahead. The Republican has pledged to clamp down on immigration to the U.S. and renegotiate free-trade agreements. In his victory speech, he pledged to focus on rebuilding U.S. infrastructure.
Stocks
U.S. stocks rebounded as speculation Trump will pursue business-friendly policies offset some of the broader uncertainty surrounding his ascent. The S&P 500 rose 1 percent to 2,159.89 at 12:04 p.m. in New York, after falling as much as 0.7 percent.
Health-care shares surged as investors unwound bets that a win by Clinton would bring intense regulatory scrutiny. Meanwhile, Bank of America Corp. led lenders higher on speculation a Trump presidency could usher in reforms that ease regulatory burdens on financial-services firms.
“We expect the equity market response to the election result will be limited,” David Kostin, chief U.S. equity strategist at Goldman Sachs Group Inc. “The U.S. economy has been expanding for seven years and continues to grow at a subdued pace. We expect the U.S. stock market will climb slowly during the next few years in line with earnings growth.”
Global stocks tend to advance on days when Americans vote for a new president, and continue their rally in the aftermath — if not in crisis times. Since its inception in 1987, the MSCI All-Country World Index climbed at least 2.6 percent in the three months following a presidential vote, except during the dot-com bubble burst in the early 2000s and the 2008-2009 financial crisis.
The Stoxx Europe 600 Index rose 1.5 percent, rebounding from an earlier slide.
The MSCI Emerging Markets Index slid 2.3 percent, paring losses after Trump’s speech sought reconciliation and cooperation with his political opponents. Benchmark gauges in Brazil, Mexico and China slumped. Russian shares soared.
Bonds
Treasuries tumbled, with 30-year bond yields climbing the most this year, as investors assessed what a Trump presidency will mean for U.S. fiscal and monetary policy.
A bond-market gauge of inflation expectations climbed to the highest since July 2015. Shorter-dated notes outperformed and a gauge of the yield curve steepened as traders judged that Trump’s victory makes it more likely the Federal Reserve will hold off raising interest rates for fear of hurting U.S. growth.
“The long end of the curve is under significant pressure for what the market believes to be the Trump platform: protectionism, retaliatory tariffs and fiscal stimulus, all of which are inflationary and bad for the dollar,” said Ian Lyngen, the New York-based head of U.S. rates strategy at BMO Capital Markets, a primary dealer.
Treasury 10-year yields climbed 15 basis points, or 0.15 percentage point, to 2 percent.
Currencies
The dollar surged the most since the day after the U.K.’s vote to leave the European Union, recovering from an overnight selloff, as Trump’s conciliatory victory speech calmed market participants reeling from the shock result in the U.S. presidential election.
“The speech did calm the market down,” said Stephane Marie, head of foreign-exchange dealing operations at Swissquote in Gland, Switzerland. “So far, we only saw the eccentric, megalomaniac Trump and people were expecting, as was I, a very aggressive speech. But his speech was professional and presidential. It was a surprise.”
A Bloomberg gauge of the dollar was set for its biggest gain since June 24, and reached the highest since March. The dollar rose 0.7 percent to 104.48 yen, and by 0.6 percent to $1.0957 per euro, having earlier plunged about 2.4 percent.
Mexico’s peso tumbled to a record, sinking 9.3 percent to 20.20 per dollar. The peso acted as a barometer throughout the presidential campaign, weakening when polls swung in favor of Trump, who has pledged to renegotiate the North American Free Trade Agreement and curb illegal immigration by building a wall along the U.S.’s southern border. Analysts at Nomura Holdings Inc. and Capital Economics say the currency may fall to as low as 25 per dollar in the aftermath of his victory.
Commodities
Gold pulled back from its biggest jump since Britain’s Brexit vote as turmoil across financial markets eased. Bullion for immediate delivery gained 1.9 percent to $1,300.24 an ounce by 1:18 p.m. in London, according to Bloomberg generic pricing. It earlier surged as much as 4.8 percent.
About 570,000 futures changed hands by 8:06 a.m. in New York, based on data using the most-active Comex contract. That’s triple the full-day average this year and U.S. trading is just getting underway.
Copper for three-month delivery touched a 15-month high before trading up 2.9 percent at $5,355 a metric ton, leading gainers as of 11:41 a.m. on the London Metal Exchange. Mining stocks benefited. Antofagasta Plc jumped 4.2 percent and Glencore Plc 2.8 percent.
West Texas Intermediate for December delivery rose 63 cents to $45.61 a barrel at 11:42 a.m. on the New York Mercantile Exchange, after dropping as much as $1.91 to $43.07. Brent for January settlement climbed 56 cents to $46.60 a barrel on the London-based ICE Futures Europe exchange. The global benchmark traded at a 40-cent premium to WTI for January delivery.