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Canada’s main stock index opened higher on Wednesday, helped by strength in energy stocks, while investors eyed the prospect of a Democrat-controlled Senate in the United States.

Wall Street’s main indexes were mixed, with the S&P 500 and Dow higher but the Nasdaq falling, as the likelihood of Democrats gaining control of the Senate sparked fears of increased regulatory scrutiny of technology mega-caps.

In early trading, the Toronto Stock Exchange’s S&P/TSX composite index was up about 100 points, or 0.50%. The Nasdaq was down 0.57% and the S&P 500 was up 0.17%.

Canadian and U.S. bank stocks were trading decisively in the green, as the U.S. 10-year Treasury yield this morning broke through 1% for the first time since early 2020 on bets the Democrats will now have more control to unleash spending, which could be inflationary. Meanwhile, cannabis and green energy stocks were surging on both sides of the border in reaction to the George runoffs.

Democratic challenger Raphael Warnock won a hotly contested Senate race in Georgia over Republican incumbent Kelly Loeffler, while Democrat Jon Ossoff held a narrow lead over incumbent Republican David Perdue in the other race.

A so-called “blue wave” would give more scope for President-elect Joe Biden to act on his reform plans including new COVID-19 stimulus - which could be inflationary - but it could also mean higher corporate taxes and more regulations for technology behemoths, which had led Wall Street’s recovery from a coronavirus-driven crash last year.

“If Democrats hold both Houses then there will be more pressure to regulate some of the bigger play within growth and most of the (market) gains are concentrated in them,” said Sebastien Galy, macro strategist at Nordea Asset Management.

Hopes of a vaccine-powered economic recovery in 2021 had sent Wall Street’s main indexes to record highs in late-December, with sectors that had previously lagged, including banks, industrials and energy, fuelling the rally.

“You are seeing more evidence of a rebound in value over growth, and it feeds into the debate as to whether investors should pile into more cyclicals which are co-related with value or stick to bigger players within the growth space given that valuations in some cases are quite extreme,” Galy added.

“The market is quite nervous about its position in large tech.”

Invesco Solar ETF gained about 9% on expectations that clean energy companies will benefit under a Democrat-control Congress, while bets on the decriminalization of marijuana at the U.S. federal level lifted the Horizons Marijuana Life Sciences ETF by about the same amount. Shares in Canopy Growth were up close to 10% in the premarket.

Equities

Commodities

Oil prices extended gains on Wednesday, rising to their highest since late February, after Saudi Arabia announced a big voluntary production cut, and as an industry report showed U.S. inventories fell last week.

Brent crude rose 85 cents, or 1.6%, to $54.45 a barrel at 1050 GMT, its highest level since Feb. 26, 2020, after jumping about 5% on Tuesday.

U.S. West Texas Intermediate futures were up 52 cents, or 1%, to $50.45 a barrel, also their highest since Feb. 26. The contract on Tuesday closed up 4.6%.

Saudi Arabia, the world’s biggest oil exporter, on Tuesday announced it would make additional, voluntary oil output cuts of 1 million barrels per day (bpd) in February and March, after a meeting of OPEC+, which groups Organization of the Petroleum Exporting Countries producers and others, including Russia. [nL1N2JG0GX]

With coronavirus infections spreading rapidly producers are wary of a further hit to demand.

Gold prices hit a fresh two-month high on Wednesday as the dollar slid on growing expectations of a Democratic win in the U.S. Senate run-off election in Georgia, which would likely lead to additional fiscal stimulus.

Spot gold was up 0.4% to $1,956.86 per ounce at 1029 GMT, having hit a near two-month peak at $1,959.01 earlier in the session. U.S. gold futures were up 0.3% to $1,960.40.

“A Biden win in Georgia opens the gates to a much larger stimulus. The markets have been anticipating that by its moves higher in the last few days,” said Ross Norman, an independent analyst, referring to U.S President-elect Joe Biden.

“Whether that turns into (something) productive down the line remains to be seen, but clearly they’re going to be adding considerable debt onto considerable debt, and that’s good for gold.”

Currencies and bonds

The Canadian dollar is tracking slightly weaker this morning against the greenback thanks to the firmness in crude oil prices. Scotiabank strategists point out this morning that the loonie is still lagging its commodity peers (and most of the other G10 currencies) so far in January, with a gain of a little less than 0.75% against the greenback since the start of this year, compared with +1.6% for the Australian dollar and 1.8% for the New Zealand dollar.

“Relatively mild gains and rising commodity prices suggest that CAD valuation is not especially stretched at this point. Look for spot to continue tracking the broader USD tone in the short run and for the CAD rally to move on a little more perhaps before profit-taking starts to slow gains,” the Scotia strategists said in a note.

Economic news

Greater Toronto Area home sales surged 64.5% year-over-year in December as 7,180 properties traded hands, according to data released Wednesday by the Toronto Regional Real Estate Board. The average selling price for all homes sold in December was $932,222, representing an 11.2 per cent increase from a year earlier. Similar hot housing markets were seen in Montreal and Vancouver, according to their real estate boards.

U.S. private companies unexpectedly shed workers in December for the first time in eight months as out-of-control COVID-19 infections unleashed a fresh wave of business restrictions, keeping consumers from restaurants, bars and other services industry establishments. Private payrolls decreased by 123,000 jobs last month, the ADP National Employment Report showed on Wednesday. That was the first decline in private payrolls since April. Data for November was revised slightly lower to show 304,000 jobs added instead of the initially reported 307,000. Economists polled by Reuters had forecast private payrolls would rise by 88,000 in December.

(945 a.m. ET) U.S. Services PMI for December.

(10 a.m. ET U.S. factory orders for November. Analysts expect a rise of 0.6%, down from a rise of 1% in October.

(2 p.m. ET) U.S. FOMC meeting minutes.

READ MORE: Market movers: Stocks seeing action on Wednesday - and why

With files from Reuters