On Monday, major stock indices set record highs yet again, as investors cheered on an expected wave of stimulus spending. At the same time, strong quarterly earnings from major companies are giving positive vibes.
Stock Indices Set Record Highs
The Dow Jones Industrial Average closed 237.52 points, or 0.8%, higher yesterday at 31385.76. The DJIA continued its rise even as it posted its biggest one-week advance since November. Meanwhile, the S&P 500 rose to 3915.59, rising 28.76 points or 0.7%. Then, the technology-heavy Nasdaq Composite closed at 13987.64, gaining 131.35 points, or 0.9%. All three indexes ended the day at records.
Recent trading sessions, buoyed by anticipation for increased government spending. The possibility for more stimulus is all the more apparent as Democrats are now turning to the reconciliation process in Congress. This means that the majority party can approve President Joe Biden’s $1.9 trillion relief plan through a simple majority. House lawmakers are currently finalizing details of a relief bill by February.
Your Birthday and Christmas at the Same Time
“It’s like your birthday and Christmas on the same day, and the markets are all happy,” remarked Daniel Morris, chief market strategist at BNP Paribas Asset Management. Once the US, which is a net importer, goes into another round of stimulus spending, overseas stock markets will also get a windfall. Besides, Morris said that if the “motors of growth” in both the US and China are beginning to become active, that should help everyone.
The market seemed to survive the volatility swings caused by the GameStop saga, where retail investors engaged in a tug-of-war with hedge funds for control of an ailing stock. Now, investors are looking at utilizing stimulus spending to boost the market growth. The timing coincides with the wave of companies reporting strong holiday sales for the previous quarter. According to FactSet, 81% of the 295 S&P 500 companies that reported earnings results said they beat estimates.
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Even Bitcoin joined the party. The cryptocurrency zoomed 16% to around $44,797 after EV maker Tesla said they are investing $1.5 billion. Also, Tesla said that it will start accepting crypto payments for its products, causing stocks to rise by 1.3% or $11.19.
Yellen Says the US Can Return to Full Employment Next Year
Last Sunday, Treasury Secretary Janet Yellen told CNN that the US can return to full employment status by next year if lawmakers pass Biden’s stimulus package. “There’s absolutely no reason why we should suffer through a long slow recovery,” she said.
Long-term unemployment is reaching its historical peak almost a year into the pandemic, with around 40% of unemployed workers remaining jobless for six months. Meanwhile, the Bureau of Labor Statistics reported that the unemployment rate fell to 6.3% in January. Nearly 9 million fewer Americans have jobs compared to February last year.
Sectors Continue to Push Forward
The energy sector is currently making a push, which helped stock indices set record highs. Oil markets continue to gain momentum, with Brent crude futures breaching the $60 a barrel mark for the first time since January 2020. The global energy benchmark went up 2.1% and settled at $60.56 a barrel. The rally pushed energy stocks to top performer status among S&P 500 stocks, where ten of the index’s 11 sectors ended as gainers. Only utilities, which is a traditionally defensive play, posted a decline.
Paul Christopher, global market strategy head at the Wells Fargo Investment Institute, says it’s almost time. Stimulus hopes, US consumer savings over last year, and vaccine updates are pushing a bullish mood. “There’s a lot of dry powder on the sidelines waiting to be spent,” he noted.
Watch the Yahoo Finance video reporting that the stock market hit record highs, establishing that we are in a bull market, so expect more highs:
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