Stocks Rise as Traders Bet on Volatile Election Season

By Anna Isaac

U.S. stocks rose Monday, recovering some ground after four consecutive weeks of declines.

The Dow Jones Industrial Average gained 319 points, or 1.2%, in morning trading. The S&P 500 rose 1.1%, while the technology-heavy Nasdaq Composite climbed 1.2%.

The gains came as investors said last week's selloff was overdone.

"There's been a lot of froth in markets recently that has been washed out. The underlying fundamentals are all moving in the right direction," said Hani Redha, a portfolio manager at PineBridge Investments. "We are in the early stages of a multiyear expansion. It will remain volatile in the coming weeks, but overall the trend will remain upward."

The Cboe Volatility Index, a measure of expected swings in the S&P 500, climbed Monday. Investors' concerns about rising or elevated levels of coronavirus infections, the uneven pace of economic recovery, political risks and continued tensions between Beijing and Washington have increased the turbulence in the market this month.

Traders are betting on one of the most volatile U.S. election seasons on record, wagering on unusually large swings in everything from stocks to currencies. Investors are scooping up a variety of investments that would pay out if volatility extends far beyond Election Day itself, concerned that the outcome of the presidential contest could remain unclear into December.

"It's a very different environment than that we've seen for any other election," said James McCormick, a strategist at NatWest Markets. "As an investor, you have to protect yourself because you just don't know how this is going to swing."

Investors have grown more concerned about this election after President Trump has repeatedly suggested, without offering evidence, that mail-in ballots will result in widespread fraud benefiting Democrats.

"We've had a lot of comments from President Trump last week indicating that he may not want to hand over power smoothly," said Jane Foley, head of foreign-exchange strategy at Rabobank. "You're in an environment where you've had physical Black Lives Matter protests and a rise in unemployment. That's more likely to be a tinderbox for social unrest."

The energy, financial and industrial sectors, which tend to be sensitive to economic trends, were among Monday's strongest performers.

Shares of Devon Energy rose 3.5% after The Wall Street Journal reported and the company later confirmed a merger agreement with WPX Energy. The move could help the energy companies weather a prolonged industry slump. WPX's stock climbed 4.5%.

Uber shares gained 3.5% after the ride-hailing company won an appeal over the revocation of its operating license in London, ending for now a yearslong tussle with regulators in one of its biggest global markets.

Overseas, the pan-continental Stoxx Europe 600 rose 2%. A combination of national governments introducing new fiscal measures to support economies across the region and signs that fresh restrictions are only having a minimal impact on economic activity is offering some relief, investors said.

"We have had this case surge, and it has taken away one of the positive arguments for Europe from the summer," Mr. McCormick said. "But if you look at the mobility data, nothing's actually changed in Europe. The restrictions are at the margin."

Diageo shares rose more than 6% in London after the maker of Johnnie Walker and Smirnoff said its first-half outlook had improved after a strong start to the year.

In Asia, most major benchmarks ended the day in positive territory. Japan's Nikkei 225 Index rose 1.3%, while Hong Kong's Hang Seng rose 1%.

China's Shanghai Composite Index declined less than 0.1%. New government data showed the nation's industrial profit grew at a slower pace in August as the export sector faced challenges with the reopening of overseas factories.

In bond markets, the yield on the benchmark 10-year Treasury was little changed, slipping to 0.658% from 0.659% Friday.

Futures on Brent crude, the international energy benchmark, fell 0.3% to $42.27 a barrel.

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