Wall Street hits records amid profit reports, Biden inauguration
US stocks rallied to records on Wednesday on encouraging earnings reports and continued optimism that new leadership in Washington will mean more support for the struggling economy.
The S&P 500 was 1.3 per cent higher at 3,848 points in early afternoon trading, topping its record closing level of 3,824.68 set earlier this month. The Dow Jones Industrial Average was up 0.7 per cent, at 31,157 and the Nasdaq composite was 1.8 per cent higher.
Joe Biden took the oath of office to become president of the United States, with a flurry of executive actions at the ready. He has also pitched a plan to pump US$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 hope on Wall Street is that such stimulus will help carry the economy until later this year, when more widespread COVID-19 vaccinations get daily life closer to normal. Such hopes have helped stocks and Treasury yields rise, even as the worsening pandemic digs a deeper hole for the economy. Spiralling coronavirus counts and deaths have more workers applying for unemployment benefits and shoppers feeling less confident.
The incoming Biden administration is taking control of the White House from Donald Trump.
Gains for stocks have been accelerating since Biden’s election, before his inauguration, on enthusiasm about COVID-19 vaccines and hopes that he and Congress can deliver more stimulus for the economy. The bump for stocks between the most recent election day and Biden’s inauguration is bigger than Trump’s bump before his inauguration.
Janet Yellen, Biden’s nominee to be Treasury secretary, told the Senate Finance Committee during her confirmation hearing on Tuesday that the incoming administration would focus on winning quick passage of its US$1.9-trillion plan.
“More must be done,” Yellen said. “Without further action, we risk a longer, more painful recession now – and long-term scarring of the economy later.”
A better-than-expected start to earnings reporting season was also helping to lift the market on Wednesday. Netflix jumped 15.9 per cent for one of the market’s biggest gains after it said it ended last year with more than 200 million subscribers. Morgan Stanley initially rose after reporting much stronger earnings for the latest quarter than Wall Street had forecast, though its gain sputtered as the day progressed.
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.
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 roll-out of vaccines, will likely help bolster markets and the recovery.
“We see more upside in equities in general,” she said. “We think that global growth is going to continue to pick up.”