Wall Street posts record highs on President Joe Biden’s first day in office, with all major indices closing higher than ever. The Dow Jones Industrial Average gained 257.86 points or 0.8%, then closed at a record 31,188.38. Meanwhile, the S&P 500 closed 52.94 points, or 1.4% higher, and set a new closing high of 3,851.85. The S&P also set an intraday record of 3,859 points. Then, Nasdaq closed 2% percent higher and set a record of 13,457.25.
The January 20 rally reflected Wall Street’s continued optimism in continued economic recovery efforts. The markets look forward to Increased stimulus programs and a ramped vaccine distribution program. These two are part of earlier promises by the Biden administration. Yesterday’s performance continued this optimistic behavior, with investors expecting Democrats to follow through with their demands for increased stimulus programs.
According to Brian O-Reilly, Mediolanum Investment Funds market strategy head, investors still avoid companies that fail to meet expectations, which shows their selectiveness. “Any company that is likely to miss or modestly disappoint on earnings will be punished quite heavily. A lot of optimism has already been priced in and typically you don’t get too much room for maneuver when a stock is at a historic high,” he said. For example, shares of UnitedHealth fell by $1.35 as the company reported reduced profits for the previous quarter.
Netflix Lifts Tech Stocks
Netflix offset the losses from the other sectors and led tech stocks back into the black. The streaming company’s shares zoomed 17%, a new record for single-day gains in the last four years. It reported better than expected results for the last quarter and said they managed to sign 200 million subscribers by the end of 2020. More importantly, Netflix disclosed it has enough money in the bank to fund its operations and wouldn’t need loans anymore. In fact, the company is considering buybacks for some of the stock.
Netflix’s rise led investors to seek similar streaming companies and other tech stocks that got buoyed by the pandemic. This kicked off a broader stock market rally that lifted shares for streaming and tech stocks such as Disney, Apple, Alphabet, Facebook, and others.
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Days before his inauguration, Biden unveiled a $1.9 trillion bill aimed at providing stimulus relief and help with vaccine distribution. The alarming rise in unemployment numbers in December cast a long shadow on the country’s economic recovery efforts. Treasury secretary nominee Janet Yellen told senators they should act “act big” on economic relief during her confirmation hearing Tuesday.
The incoming Treasury secretary said “Neither the president-elect, nor I, propose this relief package without an appreciation for the country’s debt burden, But right now, with interest rates at historic lows, the smartest thing we can do is act big. She emphasized that inaction is more expensive than doing something about the U.S. economy. “In the long run, I believe the benefits will far outweigh the costs, especially if we care about helping people who have been struggling for a very long time,” Yellen noted.
88% of Companies Beat Estimates
Earnings results in the markets showed better than expected results by Wednesday. FactSet reported that 88% of companies beat estimates while the inauguration celebrations went on. Analysts believe that this performance, along with anticipated profit growth this year and an economic rebound, should propel the stock market even higher this year.
Terry Sandven, Chief Equity Strategist at US Bank Wealth Management, said that stocks should trend higher this year. “Restrained inflation, low-interest rates, and rising earnings provide valuation support and the basis for stocks to trend higher,” he said. Sandven added that there are favorable growth trends for communications stocks such as Netflix, along with companies in the tech, consumer discretionary, and health-care sectors.
Watch the CommSec TV Morning Report showing that the Dow Jones, S&P 500 & Nasdaq end on record highs during the first day of the Biden administration:
Do you agree with the optimistic outlook for the stock market this year? Do you attribute it to the Democrats winning the elections? Let us know what you think. Drop a line or leave your comments below.