Wall Street soars to record highs amid stimulus hopes
Major U.S. stock indexes surged to all-time highs Thursday as Wall Street bet that the Democratic sweep of Washington means more stimulus is on the way for the economy.
The S&P 500 rose 1.5% to a record high in the first day of trading after Congress confirmed Joe Biden as the winner of the presidential election and Jon Ossoff was declared the winner of a Georgia runoff election, tipping control of the Senate to Democrats. The Dow Jones Industrial Average, Nasdaq composite and Russell 2000 index of smaller companies also notched new highs.
The rally was broad-based, though the S&P 500’s technology sector notched the biggest gain, recouping losses after a pullback a day earlier. Treasury yields continued to rise, reflecting expectations that higher government spending will drive up inflation.
Investors and analysts are anticipating the Biden administration and a Democrat-controlled Congress will try to deliver $2,000 checks to most Americans, increase spending on infrastructure and take other measures to nurse the economy amid the worsening pandemic.
“The expectations are shifting to more stimulus, sooner, which is generally better for the economy and better for the market as well,” said Rob Haworth, senior investment strategy director at U.S. Bank Wealth Management.
The S&P 500 rose 55.65 points to 3,803.79. The Dow gained 211.73 points, or 0.7%, to 31,041.13. The tech-heavy Nasdaq climbed 326.69 points, or 2.6%, to 13,067.48. The Russell 2000 picked up 38.96 points, or 1.9%, to 2,096.89.
Wall Street’s latest rally adds to gains from a day before, when stocks climbed after the Rev. Raphael Warnock was declared the winner of the first of two Georgia runoffs and expectations built for a Democratically controlled D.C. Markets gave up much of their early gains Wednesday, though, after loyalists to President Donald Trump stormed the U.S. Capitol as lawmakers were confirming his loss.
Investors have largely looked past the current political ugliness — and the pandemic’s acceleration around the world — and are focused on prospects for an improving economy in the future. Beyond hopes for increased stimulus for the economy from
Washington, much of Wall Street expects the rollout of COVID-19 vaccines that’s just begun to help daily life around the world get closer to normal. That has investors anticipating a explosive return to growth for corporate profits this year.
The market “is really looking through to year-end at what looks like a really solid year for earnings growth,” Haworth said.
Trump may have backed up investors’ expectations that the turmoil engulfing Washington may be only temporary. Shortly after Congress certified his loss, he issued a statement saying there will be an “orderly transition on January 20th.” Trump still claims falsely that he won, having appeared to excuse the violent occupation of the Capitol by his supporters. Earlier, Trump riled up the crowd with baseless claims of election fraud.
Even so, the market could be in for more choppy trading in the days before Biden takes over as president.
“We still see this as a market on edge with volatility higher than normal,” Haworth said. “We think there’s a lot of risk out there. Part of that is certainly political transition, part of it is certainly the virus and virus uncertainty.”