US high stock indexes rose to historic highs on Thursday as Wall Street bet that Washington’s democratic sweep means more stimulus is developing for the economy.
The S&P 500 rose 1.5% to a record 3,803. Investors backed by congressional confirmation of Joe Biden’s presidential election victory and shift of Senate control to Democrats and went largely through the violence and chaos of the previous day at the Chapter building.
With Democrats in full control of Washington, Wall Street anticipates the Biden administration, and Congress will try to deliver $ 2,000 checks to most Americans, increase infrastructure spending and take other measures to take care of the economy as the pandemic worsens.
“Expectations are moving earlier, faster, which is generally better for the economy and better for the market,” said Rob Haworth, senior director of investment strategy at US Bank Wealth Management.
The rally was large, although the S&P 500 technology sector saw the biggest gain, recovering losses after a retreat a day earlier. Treasury yields continued to rise, reflecting expectations that higher government spending will increase inflation.
The Dow Jones Industrial Average, the Nasdaq composites and the Russell 2000 index of smaller companies also set new highs. The Dow gained 211.73 points, or 0.7%, to 31,041.13. Nasdaq, with a technology intensity, rose 326.69 points, or 2.6%, to 13,067.48. Russell 2000 gained 38.96 points, or 1.9%, to 2,096.89. The S&P 500 rose 55.65 points to 3,803.79.
The latest rally on Wall Street adds to the gains of the previous day, when shares rose following the results of two Senate elections in Georgia, which went to Democrats. But the market retreated somewhat on Wednesday, after loyalists of President Donald Trump stormed the Chapter, while lawmakers certify its loss to Biden.
Investors are largely looking at the current political ugliness – and the accelerating pandemic worldwide – and instead focuses on the prospects of an improving economy. Beyond hopes for an increased incentive in Washington, much of Wall Street expects the launch of COVID-19 vaccines to help everyday life around the world get closer to normal. This makes investors anticipate an explosive return to growth for corporate profits at the end of the year.
The market “is really looking until the end of the year at what appears to be a really solid year for earnings growth,” Haworth said.
It is possible that Trump has supported investors’ expectations that the turmoil in Washington could only be temporary. Shortly after Congress certified his loss, he issued a statement saying there would be an “orderly transition.” on January 20th. Trump continues to falsely claim to have won, appearing to apologize for the violent occupation of the Capitol by his supporters. Earlier, Trump angered the crowd with unfounded claims of electoral fraud.
Even so, the market could have a more hectic transaction in the days before Biden took over the presidency.
“We still see this as an edge market with higher volatility than normal,” Haworth said. “We believe there is a lot of risk there. Part of it is definitely a political transition, part of it is definitely the virus and the uncertainty of the virus. “
A report on Thursday showed that the economy remains fragile due to the worsening pandemic, but it was not as bad as economists expected. Fewer workers in the United States have applied for unemployment benefits last week than the previous week, at 787,000, when economists forecast growth.
Another more encouraging report said that growth in the US service industries it accelerated last month and was stronger than economists expected.
Anticipation of a greater stimulus for the economy, rising US government borrowing and, perhaps, country-wide inflation have pushed Treasury yields to levels not seen since the beginning of the pandemic. The 10-year yield rose 1.08% from 1.02% late Wednesday after surpassing the 1% level for the first time since March.
Higher interest rates allow banks to make higher profits from loans, as does a stronger economy, and financial stocks have once again been among the market leaders. JPMorgan Chase was up 3.3% and Bank of America was up 2.2%.
Technology stocks also rose, recovering from the weakness a day earlier, due to concerns that democratically-run Washington would target tougher regulations. Facebook rose 2.1% after losing 2.8% on Wednesday.
Hong Kong’s Hang Seng index fell 0.5% after the New York Stock Exchange reversed again and said it would eliminate three major Chinese telecommunications companies following a previous order from the White House. Companies are heavy in Hang Seng.
Shares in those companies and internet companies affected by an extended ban on transactions with applications of some Chinese companies fell sharply “because of Donald Trump’s actions, trying to hurt China,” said Francis Lun, chief executive for Geo Securities in Hong Kong.
“Chief Saner, with better reasoning, hopes that when Biden becomes president he will try to correct the mistakes Donald Trump made in the deterioration of the US-China relationship,” Lun said.
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AP Business writer Elaine Kurtenbach and AP reporter Alice Fung contributed.