Stocks rally ahead of a potentially turbulent election week

U.S. stocks rebounded from the worst week since March as investors bet on the energy, materials and industrial sectors ahead of Tuesday’s presidential election. Crude oil rose the most in more than three weeks.

Dip buyers helped the benchmark S&P 500 finish up 1.2%, although it closed down from the highs of the day. It slumped 5.6% last week.

The tech-heavy Nasdaq lagged, weighted down by Apple Inc. and Amazon.com Inc. as investors rotated from so-called work-from-home stocks and into sectors that would benefit from more stimulus.

The S&P 500 Index climbed 1.2%, to 3,310.23, the largest increase in three weeks. The Dow Jones industrial average jumped 1.6%, to 26,924.66, the biggest surge in almost four weeks. The Nasdaq rose 0.4%, to 10,957.61.

“There’s a lot of general positioning before this event, investors are a little bit jittery,” said Charlie Ripley, senior investment strategist for Allianz Investment Management. “You layer in a few of the other uncertainties—it’s still the COVID situation, with things going on in Europe and parts of the U.S. in the Midwest, investors were reminded that the uncertainty in that situation can still dominate markets.”

With one day before the American presidential election, volatility returned, with the Chicago Board Options Exchange’s Volatility Index, or fear gauge, remaining elevated. Polls continue to show Democrat Joe Biden ahead, though battleground states remain tight. The U.S. reported a slight slowdown in virus cases over the weekend, but several states continued to notch record numbers of infections.

Once the U.S. election passes, investors will contend with the Federal Reserve delivering a policy decision Thursday before the October jobs report Friday. Earnings will continue to roll in, with PayPal Holdings Inc., Expedia Group Inc. and Take-Two Interactive Software Inc. among the firms reporting.

Oil clawed back earlier losses amid signals that Russia, a key OPEC ally, is in talks to possibly postpone the group’s planned output hike in January. Russia, which depends on crude as a key export, saw the ruble weaken to the lowest level since March against the dollar.

Virus developments are also front and center, with daily cases continuing to surge in many parts of the world. The U.K.’s prime minister ordered England into a four-week partial lockdown, all but shuttering the economy, while other European countries prepared to increase restrictions.

“Going into an election, there’s always, always jitters, there’s volatility,” said Quincy Krosby, chief market strategist at Prudential Financial. “But we have the question mark regarding the surge of the coronavirus. And the question is, how much does it jeopardize the recovery?”

In other markets, gold advanced while the yield on 10-year Treasurys declined. The Bloomberg Dollar Spot index gained for a fourth day.

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