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For the past two months, Wall Street’s investors have found comfort in the idea that the government was heading for gridlock, with Democrats controlling the White House and Republicans in the majority at the Senate.
It’s a view that highlights Wall Street’s preference for the low-tax, low-regulation policies championed by the Republican Party. President-elect Joseph R. Biden Jr. is expected to push for more spending on infrastructure and more support for the economy, but without the Senate’s backing, he wouldn’t be able to reverse the Trump tax cuts have been a boon to corporate profits or enact major laws that increase regulation.
That consensus helped bolster stocks late last year, adding to the rally that lifted the S&P 500 to a record.
But there’s one more threshold to cross before investors can be sure of that outcome.
On Tuesday, two Democratic Senate candidates — Jon Ossoff and the Rev. Raphael Warnock — are challenging two Republican incumbent senators — David Perdue and Kelly Loeffler — in a runoff. If both Democrats win, the party will take control of the upper chamber of Congress. (Democrats already have control of the House of Representatives.)
In recent days, analysts and traders have fixated on polling data and prediction markets that show a growing chance that the race could be closer than expected.
That Democrats could in fact win was one factor behind Monday’s 1.5 percent drop in the S&P 500, the index’s steepest daily decline since the days before the election.
At the same time, the economic crisis caused by the pandemic has scrambled the usual political calculus for investors.
On Wall Street, it’s generally agreed upon that Democratic control of the Senate could lead to a large amount of deficit spending in the early days of the Biden administration, a potential boon to the still-struggling American economy.
“A unified Democratic government will have broad leeway on fiscal policy, and in the current economic environment, unified Democratic government will mean more stimulus,” economists with Mizuho Securities wrote in a note to clients on Monday.
And there are parts of the economy that definitely stand to gain from the Biden agenda, such as alternative energy, infrastructure and some parts of the health care industry. On the other hand, businesses such as military contractors and larger pharmaceutical companies are expected to fare better if Republican keep control of the Senate.
How else might Wall Street find an upside in a Democratic victory? One answer comes from the rationalizations that investors offered before the November election, when polls (incorrectly as it turns out) indicated that Democrats would clobber Republicans up and down the ballot in a so-called Blue Wave.
Back then, analysts offered the view that even if Mr. Biden had the backing of both houses of Congress, tax increases wouldn’t be his first priority anyway.
So even if Tuesday’s election gives investors a reason to worry, they might also get over it quickly.
The New York Stock Exchange said late on Monday that it had reversed a decision to delist China’s three major state-run telecommunications companies.
The Big Board said it took the step after consulting with the U.S. Treasury Department.
Last week, the exchange said it would stop the trading of shares in China Unicom, China Telecom and China Mobile by Jan. 11 in response to a Trump administration executive order that blocked Americans from investing in companies tied to the Chinese military.
The statement did not give a reason for the decision, though it appeared that the executive order may not require the exchange to delist the companies. The exchange said that its regulatory department would continue to evaluate the applicability of the order to the telecommunications companies.
The delisting would have had little practical impact on the companies, which also have shares listed in Hong Kong and are state-owned. Still, the disappearance from the American exchange had hefty symbolic value for worsening economic ties between China and the United States.
European stocks dipped lower on Tuesday morning, unwinding some of their recent gains a day after the S&P 500 index suffered its steepest drop in more than two months.
Futures indicated stocks on Wall Street would open lower when trading begins. Two Senate runoff elections in Georgia underway on Tuesday will determine which political party controls the Senate — and how successful President-elect Joseph R Biden Jr. will be getting his agenda through Congress.
The Stoxx Europe 600 index was down 0.4 percent after gaining 0.7 percent on Monday. The CAC 40 in France declined 0.7 percent and the DAX in Germany fell 0.7 percent. The FTSE 100 in Britain slipped 0.1 percent, despite gains by energy companies like Royal Dutch Shell, which rose 2.1 percent.
Oil prices gained after an OPEC Plus meeting was suspended on Monday evening without an agreement on whether the oil-producing nations should continue curbs on production; the group will resume later on Tuesday. The growing number of restrictions on businesses and social life around the world in recent days have weakened the outlook for energy demand.
Shares in the FTSE 250, a British index with more domestic stocks, rose 0.5 percent on Tuesday even as the country was put under strict stay-at-home orders, most schools were closed and nonessential businesses were shuttered. For England, it is the third national lockdown.
For traders, the lockdown was widely expected given the sharp rise in coronavirus infections, said Susannah Streeter, an analyst at Hargreaves Lansdown.
“Many companies had glimpsed light at the end of the tunnel but now that tunnel appears much longer,” she said, adding that the entire first half of 2021 will be challenging as the expectations of a double-dip recession in Britain have grown.
The British government said an additional 4.6 billion pounds ($6.3 billion) in grants would be made available to businesses that have been forced to close.
“While fresh movement restrictions could delay the anticipated economic rebound, developed economies continue to receive ample fiscal and monetary support, which should help them bounce back swiftly once vaccines become widely available,” analysts at UBS wrote in a note. “We continue to like German and U.K. stocks for their catch-up potential.”
Chief executives and other leaders from many of America’s largest businesses on Monday urged Congress to certify the electoral vote on Wednesday to confirm Joseph R. Biden Jr.’s presidential victory.
“Attempts to thwart or delay this process run counter to the essential tenets of our democracy,” they said in a statement. Included in the list of 170 signers were Laurence D. Fink of BlackRock, Logan Green and John Zimmer of Lyft, Brad Smith of Microsoft, Albert Bourla of Pfizer, and James Zelter of Apollo Global Management.
Over the weekend, President Trump called Georgia’s Republican secretary of state in an effort to subvert the election results. On the call, which was recorded, the president pressured the official to “find” enough votes to overturn Mr. Biden’s victory. The president’s demand raised questions about whether he violated election fraud statutes, lawyers said, though a charge is unlikely. President-elect Biden won the Electoral College, 306 to 232, and the popular vote was 81.2 million for Mr. Biden to Mr. Trump’s 74.2 million.
Members of the president’s party are divided over whether to accept that he lost the election: While top Republicans, such as Mitch McConnell, the Senate majority leader, have pushed back on a futile attempt in Congress to reject the results, about a dozen senators and senators-elect have lined up behind President Trump’s bid to hold on to power.
The urging from business leaders came on a volatile day for financial markets and just a day before runoff elections in Georgia, which will determine whether Republicans or Democrats control the Senate. Coronavirus cases are surging, and vaccinations are taking more time than hoped.
Business leaders took issue with Washington’s new divide at a moment of grave uncertainty.
“Our duly elected leaders deserve the respect and bipartisan support of all Americans at a moment when we are dealing with the worst health and economic crises in modern history,” the business leaders wrote. “There should be no further delay in the orderly transfer of power.”
The statement, which was organized by Partnership for New York City, a business advocacy organization, came on the same day that Thomas J. Donohue, the head of the U.S. Chamber of Commerce, issued a statement urging certification of the vote.
“Efforts by some members of Congress to disregard certified election results in an effort to change the election outcome or to try a make a long-term political point undermines our democracy and the rule of law and will only result in further division across our nation,” Mr. Donohue wrote.
“The United States of America faces enormous challenges that not only require an orderly transition of administrations, but the focus of the incoming Biden administration and the new Congress, and cooperation across party lines,” he continued. “We urge Congress to fulfill its responsibility in counting the electoral votes, the Trump administration to facilitate an orderly transition for the incoming Biden administration, and all of our elected officials to devote their energies to combating the pandemic and supporting our economic recovery.”
Quibi, the much-hyped short-form video platform, is in talks to sell its content to Roku, the streaming device maker with a streaming app of its own. The deal is close to completion, said one person with knowledge of the discussions, who was not authorized to speak publicly. Quibi and Roku declined to comment. Quibi was a quixotic attempt to capitalize on the streaming boom. Its shows, chopped into installments no longer than 10 minutes, were meant to be watched on smartphones. But it announced it would close just six months after it launched.
Haven, the joint venture of Amazon, Berkshire Hathaway and JPMorgan Chase that was formed three years ago to explore new ways to deliver health care to the companies’ employees, is disbanding, according to a statement posted on its website. It will cease its operations at the end of February. Haven aimed to improve how people gain access to health care by pulling together the know-how and scale of three of the largest employers in America. Its formation sent shock waves through the markets. But two people familiar with the collaboration said logistical hurdles had made it harder than expected to come up with new ideas that made sense for all three companies.
Chief executives and other leaders from many of America’s largest businesses on Monday urged Congress to certify the electoral vote on Wednesday to confirm Joseph R. Biden Jr.’s presidential victory. “Attempts to thwart or delay this process run counter to the essential tenets of our democracy,” the 170 leaders said in a statement. The statement, which was organized by Partnership for New York City, a business advocacy organization, came on the same day that Thomas J. Donohue, the head of the U.S. Chamber of Commerce, issued a statement urging certification of the vote.
In the West, few issues carry the political charge of water. Access to it can make or break both cities and rural communities. It can decide the fate of every part of the economy, from almond orchards to ski resorts to semiconductor factories. And with the worst drought in 1,500 years parching the region, water anxiety is increasing.
In the last few years, a new force has emerged: From the Western Slope of the Rockies to Southern California, a proliferation of private investors have descended on isolated communities, scouring the driest terrain in the United States to buy coveted water rights.
Rechanneling water from rural areas to thirsty growth spots like the suburbs of Phoenix has long been handled by municipal water managers and utilities, but investors adept at sniffing out undervalued assets sense an opportunity, Ben Ryder Howe reports in The New York Times.
To proponents of open markets, water is underpriced and consequently overused. In theory, a market-based approach discourages wasteful low-value water uses, especially in agriculture, which consumes more than 70 percent of the water in the Southwest, and creates incentives for private enterprise to become involved. Investors and the environment may benefit, but water will almost certainly be more expensive.
“They’re making water a commodity,” said Regina Cobb, an Arizona assemblywoman. “That’s not what water is meant to be.”
As investor interest mounts, leaders of Southwestern states are gathering this month to decide the future of the Colorado River. The negotiations have the potential to redefine rules that for the last century have governed one of the most valuable economic resources in the United States.