Dow soars in face of D.C. turmoil
Index ends up at a record high point after a volatile session on Wall Street
The Dow Jones industrial average capped a volatile session Wednesday with a record high, as investors kept an eye on growing turmoil at the U.S. Capitol and tracked election results emerging out of Georgia.
The blue chip index seesawed throughout the trading day, dipping at the opening bell and then spiking nearly 600 points before closing with a 437-point, or 1.4 percent, gain.
The broader S&P 500 added 21 points, or nearly 0.6 percent, while the tech-heavy Nasdaq 100 shed about 78 points, or 0.6 percent.
The gains came even as thousands of President Donald
Trump’s supporters stormed the Capitol.
Trump continues to dispute the election results, without evidence, and had encouraged his supporters to attend the rallies.
One person was shot during the melee and later died at the hospital, and the D.C. National Guard was activated.
The rally lost some momentum Wednesday afternoon after the . Capitol went into lockdown as protesters broke through barricades and entered the building following clashes with police.
Both houses of Congress abruptly went into recess, interrupting debate over the Electoral College vote that gave Joe Biden the presidency.
Earlier, Trump riled up the crowd with his baseless claims of election fraud.
Stocks got off to a strong start after Democrats won one of the two runoff elections in Georgia. The second race also was called for them later in the day, handing the party of President-elect Biden control of the Senate.
Traders largely looked past the unrest that erupted in Washington and chose to look ahead to later this year, when they expect the prospects for the economy to brighten with the rollout of COVID-19 vaccines and the potential for increased spending on infrastructure and other areas under a Biden administration.
“The market cameoff the highs by a decent amount, so there was some impact,” said Nate Thooft,
head of global asset allocation at Manulife Investment Management. “The markets are taking it in stride because they think it’s a temporary issue that will ultimately be resolved.”
Investors spent much of the day waiting for final results out of Georgia’s Senate runoff election.
Democrat the Rev. Raphael Warnockwon his race against Republican Sen. Kelly Loeffler. Democrat Jon Ossoff defeated the GOP incumbent, Sen. David Perdue, late afternoon projections showed.
The runoff was triggered after no candidate captured at least 50 percent of the vote in November, putting control of the Senate at play. The gain of two seats gives Vice President-elect Kamala Harris the tie-breaking vote.
Many investors worry that a Democratic-controlled Senate could ease the path for the incoming Biden administration to usher in tax increases and regulatory changes.
Flipping the chamber, though, also increases the
odds of more fiscal stimulus, boosting companies that have been hard hit by the pandemic and the broader economy.
The russell 2000 index of small capitalization stocks — which are closely tied to the domestic economy— gained more than 3 percent, putting it on pace for its biggest daily gain since last May.
“The Democrats have made it perfectly clear that they want to spend more money. They wanted to do a $2 trillion or $3 trillion stimulus and we only did $900 billion, so it’s pretty likely we’re going to get another $1 trillion to $2 trillion of
spending,” said Mike Wilson, chief U.S. equity strategist at Morgan Stanley. “And that could be pretty quick.”
Most economists say such spending would be a boon to the American economy, which remains in disarray after an almost yearlong pandemic. In November, there were roughly 10 million fewer employed workers in the country than before the virus struck in February.
“A sweep for the Democrats will likely lead to additional stimulus measures that would likely boost short-term economic growth,” wrote Steve Chiavarone, portfolio manager and equity strategist with Federated Hermes, a Pittsburgh-based asset management firm.
Financial stocks soared, with Wells Fargo jumping nearly 7.1 percent, Bank of America growing nearly 6.3 percent, and Goldman Sachs up nearly 5.4 percent.
Mussio called the day of gains “a little bit goofy,” because of what a Democratcontrolled Senate might meanfor the bankingsector.
Chris Rupkey, MUFG chief financial adviser, advised investors to focus on the future of the economy — andwhat thebiden administration and new legislators will do to address persistent job losses during the pandemic and rising coronavirus cases.
More than 359,000 Americans have died of COVID-19, and nearly 21.3 million have been infected.
“A new government is returning to Washington and legislators are going to have their hands full as economic weakness seems to have returned,” Rupkey said. “The path of the economy depends on the course of the pandemic and the renewed virus outbreak has thrown the economy for a loop which dashes the hopes of nearly 10 million Americans who lost their jobs after the pandemic hit. The worst economic downturn since the Great Depression isn’t over yet.”
Energy stocks soared Wednesday, Moya said, because investors expect the new Congress to support the Biden administration’s clean energy initiatives, which will be positive in the long-termfor oil companies.
Among larger stocks, companies in industries likely to benefit from a growth boost led the gains. Commercial banks, producers of construction materials, automakers and machinery stocks were higher.
Shares of companies that could stand to gain from Biden’s push for renewable energy soared. Sunrun and Sunnova, two of the country’s largest home solar power companies, jumped more than 10 percent.
Oil markets also rallied Wednesday, though they are more focused on the pandemic and market fundamentals than the election. Brent crude, the international oil benchmark, leveled up nearly 0.8 percent to $54 a barrel. West Texas Intermediate crude, the U.S. benchmark, ticked up nearly 0.9 percent, to $50.37 a barrel.
The yield on the 10-year U.S. Treasury note jumped 9.1 percent. Bond yields move inversely to prices. Gold, another safe haven, slid 1.8 percent to $1,919.60 per ounce. Bitcoin, meanwhile, continues to skyrocket: it soared past $36,000on Wednesday just three weeks after hitting $20,000 for the first time.
“Bonds aren’t cheap. Stocks certainly aren’t cheap,” Mussio said. “Seeing things like bitcoin through the stratosphere, I think we’re definitely seeing some lofty parts of the market and investors should be doing their due diligence.”
Looking ahead, Mussio said, he expects the next big market influencer to be earnings season in the next few weeks.
“Two months after the election, we don’t have any elections in front of us for a while,” Mussio said.