Wall Street had Georgia on its mind Tuesday night, and stock futures and bonds were mostly in the crosshairs as investors looked at two contests for major Senate seats that fell to razor-thin margins on early returns.
MarketWatch's Victor Reklaitis reported that analysts describe the Georgia races as "as close as possible," and there are expectations that the winners won't be announced until Wednesday morning.
The last review revealed numbers from populous, democratic districts, particularly Dekalb, which could influence the number of votes.
Democratic challenger Jon Ossoff trailed incumbent Republican Senator David Perdue with over 90% of the vote, having previously had a good lead, according to the Associated Press.
In the other runoff election, Democrat Raphael Warnock was also slightly behind incumbent GOP Senator Kelly Loeffler.
The Senate races are runoff elections to the November general election, in which none of the candidates reached the 50% threshold required to be declared the winner.
For the markets, the prospect of a slim Democratic majority in the Senate is at stake if candidates can turn the GOP incumbents on their heads.
If either Loeffler or Perdue win on Tuesday night, Senate Republicans are expected to block further coronavirus laws and curtail any Democratic plans for expansive spending after President-elect Joe Biden takes office, experts said.
However, a democratic struggle in Georgia would give that party virtual control of this chamber, as Vice-President-elect Kamala Harris would cast groundbreaking votes as President of the chamber.
Futures for the S&P 500 index
were down 0.7% while those for the Dow Jones Industrial Average
were 0.3% lower and Nasdaq 100 futures
were down 1.3% late Tuesday.
At the regular meeting of the Dow
S&P 500 index
and the Nasdaq Composite Index
ended the session significantly higher before the political clashes.
However, some of the biggest moves have come from the bond market, with the 10-year government bond yield
knocked on the door of 1% at around 0.985% as prices fell after prices hit 0.955% and hit their high at 3:00 PM. Eastern has been closed since December 4th, according to Dow Jones Market Data. The 30-year government bond
Also up nearly 4 basis points, down 1.744% from an afternoon close at 1.705%, also the highest rate in a month.
For the bond market, Democratic gains could add declining pressure on Treasurys as analysts say inflation expectations have risen as Congress may be more inclined to pass additional budget spending measures that weigh on bond prices and lower yields would drift above.
"It looks like some of the larger Democratic wards have not yet been fully counted, so I think this could be very likely for the Democrats," said Tom di Galoma, chief executive of Treasurys Trading at Seaport Global Securities. opposite MarketWatch.
“In this case, the rates will continue to rise in the next few days. We have been seeing a very good 10-year return near 1.2% in no time, ”he wrote.
It's nearly impossible to guess which result Wall Street thinks will be the best-suited to propel stocks further higher in 2021. Last year, market participants had bet that a Biden President victory, coupled with a majority of Senate Democrats, would bring the best scenario for additional financial relief to keep the economy going from the Covid-19 pandemic.
However, a blue wave could not manifest itself and the markets nevertheless rose in the final weeks of 2020.