Investors made big moves on unresolved election night

Election night was a melee of massive market moves around the globe and whipsawing prices across asset classes, as just about every market was turned on its head and then upside-down again.

What happened: Most of the jostling came early in the evening as betting markets flipped from favoring a victory by Joe Biden to favoring one by President Trump around 7pm ET.

• Trump's path to victory became less clear around 10pm ET and those trades unwound with many assets returning to near where they had been at Tuesday's close.
• As the chances for a quick and tidy U.S. election receded so did futures prices and both the S&P 500 and the Dow were closer to even ahead of Wednesday's U.S. market open.

Where it stands: We still don't know who the president-elect will be and it could be days or even weeks or months before we do, as a barrage of lawsuits and challenges to the voting tallies are expected from both sides.

• But it appears that won't stop traders from trading, so watch out for big swings in markets between now and then.

By the numbers: The dollar tumbled to its lowest level in close to a week around 7:45pm and then rose by more than 1% by 9:40pm.

• U.S. Treasury yields spiked and then sank as betting odds moved in Trump's favor, with the yield on benchmark 10-year Treasury notes reaching a five-month high of 0.95% and then falling back to 0.77%. The 18 basis point swing between 8pm and 10pm was equivalent to the change in Treasury yields through the entire month of October.
• Markets have been pricing in a "blue wave" in which Democrats take control of the White House, Senate and House of Representatives and expecting that to bring significant increases in fiscal spending and debt.

What we're hearing: Pantheon Macroeconomics chief economist Ian Shepherdson says that odds currently favor Biden, but "Democrats’ chances of taking the Senate are low, because they appear not to have won in North Carolina, and might not win in Maine, either."

• "That would leave them with 48 seats on the night, and then a decent chance of picking up one more in the Georgia run-off on January 5. But 49 seats is not enough."

The last word: Shepherdson expects to see a stimulus bill early next year totaling around $500 billion, far less than the $2 trillion expected if Democrats had won.

• "What might change this story, later in the year, is the resurgence of Covid infections and, more importantly, hospitalizations. Both are now rising relentlessly, even before the onset of winter."