It was the latest sign of heightened volatility heading into the U.S. presidential election, with Monday’s rally ending the S&P 500’s nine-day skid-its longest losing streak in almost 36 years.
While few investors and analysts expect swings to vanish following the votes are counted, several said it was a moment of relief in a contentious election season, and that a healthier economy and improving corporate earnings would likely support stocks in the longer term.
The Dow Jones Industrial Average soared 371.32 points to its highest close since Oct. 10. Oil and the dollar jumped, while investors sold havens including gold and the yen just after the Federal Bureau of Investigation said no new evidence was found to warrant charges against Democratic candidate Hillary Clinton.
Several traders and analysts said the announcement improved Mrs. Clinton’s chances against Republican Donald Trump and removed an element of uncertainty in the event that she was elected.
The CBOE Volatility Index, which is based on the price of options that traders tend to buy when they are fearful of stock-market declines, fell 17% Monday. The “fear gauge” rose for the previous nine days in its longest stretch of gains on record as polls tightened.
“Regardless of how you feel about either of the candidates, there’s no doubt that a Clinton victory would involve less uncertainty than a Trump victory,” said David Kelly, chief global strategist at J.P. Morgan Asset Management. “Markets hate uncertainty, so if it looks more likely that Clinton will win, then I think that’s what we’re seeing in terms of the rally.”
The Dow Jones Industrial Average gained 2.1% to 18259.60. The S&P 500 climbed 46.34 points, or 2.2%, to 2131.52-its highest close since Oct. 27, the day before the FBI said it was reviewing new emails related to its investigation of Mrs. Clinton’s private server. The Nasdaq Composite added 119.80 factors, or 2.4%, to 5166.17.
It was the biggest one-day percentage gain for all three indexes since March 1.
Traders sold havens. The dollar rose 1.3% against Japan’s yen to ￥104.47, gold for November delivery fell 1.9% to $1,278.30 an ounce, and the yield on the 10-year Treasury note, which moves inversely to the price, rose to 1.826% from 1.783% Friday.
Some investors said that a win by Mrs. Clinton could leave markets relatively calm and the Federal Reserve on track to raise interest rates in December.
The WSJ Dollar Index, which measures the dollar against a basket of 16 other currencies, rose 0.5%, snapping its six-day losing streak, its longest since early March.
However, several analysts cautioned that traders shouldn’t grow too confident, recalling how Britain’s June referendum on European Union membership caught many off guard.
The S&P 500 rose 1.3% on June 23, before the Brexit results came in. The index then fell more than 5% over the next two sessions after the U.K. voted to leave the EU.
“The Brexit vote has been a very bad experience for a lot of people in the markets, and everybody has this in mind,” said Bastien Drut, strategist at Amundi Asset Management. “The week before Brexit, the vote was very tight in opinion polls, and everyone wants to avoid negative surprises like we had for the U.K.”
The S&P 500 declined 0.9% on average the day immediately after a presidential election in data going back to 1928, according to WSJ Market Data Group. The Dow industrials’ gain on Monday was its best performance on the day before a presidential election since 1932.
In one sign of caution, Monday’s rise in equities spurred investors to hedge with options. Options volumes on the most-active exchange-traded funds that track the S&P 500, Nasdaq-100 and emerging-market stocks were higher than their one-month averages, data from Trade Alert showed. The cost of puts on the ETFs were at highs versus the cost of calls, the data show. Puts give traders the right to sell shares at a certain price, while calls given them the right to buy.
Meanwhile, the cost of puts versus calls on the SPDR Gold Trust, an ETF that tracks physical gold, was near the lowest in the past year, signaling traders were bullish on the precious metal, according to Trade Alert data.
A recent fall in oil prices also has kept traders on edge. U.S. crude rose 1.9% to $44.89 a barrel Monday as riskier investments rebounded broadly, but prices are down 13% from a recent high of $51.60 reached on Oct. 19.
The S&P 500’s losing streak surprised some analysts and traders, who said the outlook for U.S. stocks is solid. Corporate earnings are improving, and the U.S. economy has showed fresh signs of strength.
The Dow Jones Transportation Average, often seen as a bellwether because it includes companies that move the goods and raw materials powering the U.S. economy, closed at its highest level of 2016.
On Friday, the October U.S. jobs report showed wage growth accelerated to its strongest pace since the recession. Gross domestic product advanced at a 2.9% annual inflation-adjusted rate in the third quarter, the strongest quarterly reading in two years, the Commerce Department said late last month.
And with about 86% of companies in the S&P 500 having reported, earnings are on track to grow 2.7% in the third quarter from the year-earlier period, according to FactSet, right after five consecutive quarters of contraction.
“By Thursday or Friday of this week, finally the wretched election will be over and people will be focused on the economy and finding a very different economic picture than the one they stopped paying attention to over the summer,” said Mr. Kelly.