Stocks rallied on Tuesday, continuing a reversal from sharp losses last week as traders turned their attention away from the pandemic and toward the resolution of the U.S. presidential campaign.
The election has been marked by rising anxiety and uncertainty — in part because of concerns that the outcome will be contested or could lead to civil unrest. Investors are hoping lawmakers in Washington can return their focus to a stimulus plan to support the economy.
Though congressional Democrats and the White House had tried to reach such a deal before the election, talks between the two sides broke down as the vote approached. Economists have warned that without more government assistance, the economy could flounder, and stocks have moved higher or lower in step with the spending bill’s prospects.
“The signal that the market cares about is that one way or another, more stimulus is likely coming, especially with rising virus case counts,” Jason Draho, head of asset allocation for the Americas at UBS Global Wealth Management, wrote in a note to clients this week.
The S&P 500 rose 1.8 percent on Tuesday. Gains this week have come after stocks plunged 5.6 percent in the last week of October.
The Stoxx Europe 600 and the FTSE 100 index in Britain rose more than 2 percent.
Optimism about the economic outlook was reflected in shares of banks and industrial companies, which were among the day’s best performers. It also propelled oil prices higher. The futures price of West Texas Intermediate rose 3 percent on Tuesday.
With the last polls released ahead of Tuesday’s vote putting Joseph R. Biden Jr. in the lead over President Trump, the trading may have also reflected some optimism that a Biden victory would lead to a bigger stimulus plan than Democrats would be able to negotiate with Mr. Trump and a Republican-controlled Senate.
Analysts said traders across markets appeared to be take positions that would pay off if Mr. Biden were to prevail.
“Suddenly there’s this feeling of, you know, what happens if I’m not positioned and Biden wins tonight,” said Simon Maughan, head of trading alpha at Liquidnet, a brokerage firm and operator of alternative trading systems, where institutional investors can trade stocks and bonds outside of exchanges.
Trading in other markets was consistent with growing expectations that the government would be doing more borrowing and spending to support growth. The yield on the 10-year Treasury rose to 0.89 percent, the highest it has been since mid-June, as investors seemed to price in both faster growth and rising amounts of debt, both of which tend to push yields up.
But the gains on Tuesday also meant that an unexpected outcome, like another odds-defying victory by Mr. Trump or an election result that is bound up in lengthy court challenges, could prove treacherous for the markets later this week.