Stimulus hopes drive stocks upward
Wall Street marked the dawn of President Joe Biden’s administration with stocks rallying to record highs as hopes build that new leadership in Washington will mean more support for the struggling U.S. economy.
The S&P 500 rose 1.4%, topping its previous all-time high set earlier this month. The Dow Jones Industrial Average,
Nasdaq composite and Russell 2000 index of smaller companies also notched record highs, powered by gains in technology, communications, health care and most other sectors.
Biden has also pitched a plan to pump $1.9 trillion more into the struggling economy, hoping to act quickly as his Democratic party takes control of the White House and both houses of Congress.
The S&P 500 rose 52.94 points to 3,851.85. The Dow gained 257.86 points, or 0.8%, to 31,188.38. The Nasdaq climbed 260.07 points, or 2%, to 13,457.25. The Russell 2000 picked up 9.48 points, or 0.4%, to 2,160.62.
A better-than-expected start to earnings reporting season also helped lift the market Wednesday. Analysts came in with low expectations, forecasting the big companies in the S&P 500 will report a fourth straight drop in earnings per share because of the damage from the pandemic. But the vast majority of the earliest reports have managed to top forecasts.
Netflix jumped 16.9% for the S&P 500’s biggest gain after it said it ended last year with more than 200 million subscribers. It also said it made more in revenue during the end of 2020 than analysts expected, though its earnings fell short of forecasts. Business is good enough for the company that it says it likely doesn’t need to borrow anymore to cover its day-to-day operations.
US Bancorp was down $2.49 to $45.58. The bank’s revenue fell short of Wall Street forecasts as lower consumer spending cut into payment and deposit services.
Analysts have been expressing concerns about pricey stock values heading into the latest round of corporate earnings, but they look more reasonable amid the backdrop of historically low interest rates, said Solita Marcelli, chief investment officer, Americas, at UBS Global Wealth Management. The low rates, along with new stimulus and the continued rollout of vaccines, will likely help bolster markets and the recovery.
“We think that global growth is going to continue to pick up,” she said.
Companies will need to meet the market’s expectations – including for a huge rebound in profit growth through 2021 – to validate the big runs for their stock prices during 2020, even as their profits plummeted. Stocks of several companies slipped on Wednesday, even though they reported stronger profits than expected; Procter & Gamble fell 1%.
The yield on the 10-year Treasury rose to 1.09% from 1.07% late Tuesday.
Gold for February delivery rose $26.30 to $1,866.50 an ounce. Silver for March delivery rose 45 cents to $25.77 an ounce, and March copper rose 1 cent to $3.64 a pound.
The dollar fell to 103.54 Japanese yen from 103.87 yen. The euro fell to $1.2107 from $1.2126.