Wall Street rises on Democratic wins, 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 Standard & Poor’s 500 index rose 1.5% to a record 3,803. Investors were buoyed by Congress’ confirmation of Joe Biden’s presidential election win and a shift in control of the Senate to the Democrats. They largely moved on from the previous day’s violence and chaos at the Capitol building.
With Democrats fully in control of Washington, Wall Street is anticipating the Biden administration and 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 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.
The Dow Jones industrial average, Nasdaq composite and Russell 2000 index of smaller companies also notched new highs. 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. The S&P 500 rose 55.65 points to 3,803.79.
Wall Street’s latest rally adds to gains from a day before, when stocks rose on the results of two Senate runoff elections in Georgia that went to the Democrats. But the market did pull back somewhat Wednesday after loyalists to President Trump stormed the Capitol as lawmakers were certifying his loss to Biden.
Investors are largely looking past the current political ugliness — and the pandemic’s acceleration around the world — and are focusing instead on prospects for an improving economy. Beyond hopes for increased stimulus from Washington, much of Wall Street expects the rollout of COVID-19 vaccines to help daily life around the world get closer to normal. That has investors anticipating a explosive return to growth for corporate profits later this year.
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.
A report on Thursday showed that the economy remains fragile because of the worsening pandemic, but it wasn’t quite as bad as economists expected. Slightly fewer U.S. workers applied for unemployment benefits last week — 787,000 — than the week before. Economists were forecasting an increase.
Another more encouraging report said that growth in U.S. service industries accelerated last month and was stronger than economists expected.
Anticipation of more stimulus for the economy, increased U.S. government borrowing and perhaps inflation across the country have been pushing Treasury yields to levels not seen since early in the pandemic. The 10-year yield rose to 1.08% from 1.02% late Wednesday, after topping the 1% level for the first time since March.
Higher interest rates allow banks to make bigger profits from making loans, as would a stronger economy, and financial stocks were again among the market’s leaders. JPMorgan Chase rose 3.3% and Bank of America gained 2.2%.
Tech stocks also rose, recovering from weakness a day earlier on worries that a Democratically run Washington would target them with tougher regulations. Facebook rose 2.1% after losing 2.8% on Wednesday.
Hong Kong’s Hang Seng index slipped 0.5% after the New York Stock Exchange reversed again and said it would delist three big Chinese telecom companies, following an earlier order from the White House. The companies are heavyweights in the Hang Seng.
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