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U.S. stocks dropped more than 1% Monday on the first trading session of the year, as risk appetite ebbed amid upcoming runoff elections in Georgia and the persistent surge in coronavirus cases. But Canada’s TSX resisted the downward pull of Wall Street and closed higher thanks to its heavy weighting in gold stocks.

The S&P/TSX Composite Index closed up 94.41 points, or 0.54%, at 17,527.77, powered by a 6.49% rally in materials stocks. Gold and silver companies dominated the Canadian market’s biggest gainers, as the price of bullion rose more than 2% to its highest level in nearly two months amid a slide in the U.S. dollar. U.S. gold futures settled up 2.7% at $1,946.60.

“There is the likelihood that we will see significant stimulus, which will lead to further declines in the dollar,” said Jeffrey Sica, founder of Circle Squared Alternative Investments.

The dollar index slid to a 2-1/2 year low, making bullion cheaper for holders of other currencies.

Investors were watching Tuesday’s run-off elections in Georgia, which will decide which party controls the U.S. Senate.

“The Senate election this week could turn out to be a major disruptive event so gold is rallying on that,” Sica added.

If President-elect Joe Biden’s Democrats gain control of both houses of the U.S. Congress, his administration would find it easier to push policies such as rewriting the tax code to boosting stimulus and infrastructure spending.

Many investors view non-yielding bullion as a hedge against inflation and currency debasement that they fear could result from large stimulus measures.

Brookfield Property Partners was the Canadian market’s biggest advancer, rallying 18.41% after Brookfield Asset Management Inc. said it wants to buy back its giant real estate division. The company announced plans Monday to purchase the 38-per-cent stake of publicly listed Brookfield Property Partners LP that it does not currently own for US$16.50 per unit, a 14-per-cent premium over last week’s closing price. The deal is valued at US$5.9-billion, which includes assumed debt.

The S&P 500, which ended 2020 at an all-time high, slid 1.5% after earlier dropping as much as 2.5%. It was the benchmark index’s biggest decline since late October. Technology companies accounted for a big share of the sell-off, along with industrial, communication services, health care and other stocks. Only the S&P 500′s energy sector managed to eked out a gain.

The selling comes as coronavirus cases keep climbing at frightening rates around the world, threatening to bring more lockdown orders that would punish the economy. The worsening numbers also raise the possibility that Wall Street has been overly optimistic about the big economic recovery it sees coming because of COVID-19 vaccines. Tuesday’s upcoming runoff elections to determine which party controls the Senate may also be contributing to the volatility.

“We’ve got a wobbly start to the year here,” said Lindsey Bell, chief investment strategist at Ally Invest. “Investors are looking for a reason to lock in profits. The selling is probably a bit overdone.”

The S&P 500 fell 55.42 points to 3,700.65. The Dow Jones Industrial Average also fell from its record set last week, shedding 382.59 points, or 1.3%, to 30,223.89. At one point, it was down 724 points. The tech-heavy Nasdaq composite lost 189.84 points, or 1.5%, to 12,698.45.

Small company stocks, which have been notching solid gains in recent weeks, also fell. The Russell 2000 index of smaller companies dropped 28.94 points, or 1.5%, to 1,945.91.

Treasury yields held relatively steady after giving up a healthy gain in the morning. The price of U.S. crude oil fell 1.9%.

Stocks also fell in Japan as officials there mull a state of emergency due to surging virus cases. But optimism was more prevalent in other markets, with European and most Asian indexes closing higher.

The United Kingdom has been hit particularly hard by a new variant of the coronavirus that appears to be more contagious. On Monday, the United Kingdom became the first nation to start using the COVID-19 vaccine developed by Oxford University and drugmaker AstraZeneca.

In the United States, regulators have already approved two other vaccines. China last week gave the greenlight for its first domestically developed vaccine. Others are also being tested.

Investors have been hoping that vaccines will allow daily life around the world to slowly return to normal. That’s helped spark a recent recovery for stocks of travel-related businesses, smaller companies and other industries left behind for much of the pandemic.

Still, rising coronavirus cases, the emergence of a mutant variant of the virus and concerns that the rollout of the vaccine isn’t happening fast enough are keeping investors on edge, said Adam Taback, chief investment officer for Wells Fargo Private Bank.

“The (virus), the severity of the impact it’s going to have during the winter, is still weighing on people’s minds,” Taback said.

Even though infection rates and hospitalizations are at frightening levels, many investors have been betting that ultralow interest rates provided by the Federal Reserve and financial support for the economy recently approved by Congress can help tide the economy over until vaccinations become more widespread.

Governments might throw less stimulus at their economies than last year, but policy is “still at a very loose setting,” which supports stock prices and lending, said Kerry Craig of JP Morgan Asset Management in a report.

“Investors should look through the bumpier start to the new economic cycle and focus on the improved earnings outlook,” Craig said.

Of course, many risks remain for the market, even beyond the threat of economic lockdowns coming in the near term because of the raging pandemic. Prices have climbed enough that critics say stocks may be too expensive, particularly if the big rebound in corporate profits that investors expect to occur later this year doesn’t materialize

Read more: Stocks that saw action Monday - and why

Reuters, Globe staff

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