By Stan Choe and Alex Veiga
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 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 on Wednesday, though, after loyalists to President Donald Trump stormed the 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 later 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.”
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 than the week before, at 787,000, when economists were forecasting an increase.
Another more encouraging report said that growth in U.S. services 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% 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 telecoms companies following an earlier order from the White House. The companies are heavyweights in the Hang Seng.
Shares in those companies and Internet companies affected by an expanded ban on transactions with some Chinese companies’ apps fell sharply “because of the actions of Donald Trump, trying to hurt China,” said Francis Lun, chief executive officer for Geo Securities in Hong Kong.
“Saner heads, people with better reasoning, hope that when Biden becomes president he will try to correct the mistakes that Donald Trump has done in damaging the U.S.-China relationship,” Lun said.
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AP Business Writer Elaine Kurtenbach and AP reporter Alice Fung contributed.
Updated on January 7, 2021, at 4:52 p.m. ET.
