Raphael Warnock won the Senate election in Georgia. (Photo: Bloomberg)
Despite all the talk about how financial markets prefer a divided U.S. government to a unified one, U.S. stock markets rallied sharply Wednesday after it appeared that the two Georgia Senate runoff elections will result in a Democratic Senate and therefore a unified Democratic federal government.
Only one of the two races were decided by midday Wednesday — the Rev. Raphael Warnock, a Democrat, beat Kelly Loeffler, the Republican incumbent. But Democratic challenger, Jon Ossoff, was expected to unseat Sen. David Perdue, given his lead in votes and remaining votes still to be counted from primarily Democratic counties.
By 2 p.m. ET, the Dow Jones Industrial Average was up 610 points, or 2%, to just over 31,000; the S&P 500 gained 1.4%; and the Nasdaq, which had fallen in earlier trading, had rised 0.6%.
At the end of the trading day, the Dow closed up 438 points, or 1.4%, at 30,829; the S&P rose 0.6%; and the Nasdaq fell 0.6%.
Among the big gainers were financial stocks, which gained as the yield curve steepened and the 10-year Treasury note yield broke above 1% for the first time since March. Bank of America, Citigroup and Morgan Stanley all soared roughly 6%.
Solar stocks, such as SunPower and Array Technologies, also surged on expectations that a Democratic Congress and president will adopt policies that fight climate change, boosting alternative energy equities as well as environmental, social and governance strategies.
Mohamed El-Erian, the former co-CEO of Pimco, now chief economic advisor at Pimco's parent Allianz and president of Queens' College at the University of Cambridge, tweeted about the importance of keeping "an eye on developments in the U.S. Treasury market where the 10-year yield is now trading above 1.00% and yield curves are continuing to steepen," referring to the widening spread between two-year and 30-year Treasurys.
