Stocks notch record on hopes Biden will act on economy, COVID-19

Stocks finished at all-time highs Wednesday as Joe Biden became the 46th U.S. president, with shares rising on hopes that the new administration will provide another dose of support for an economy still reeling from high unemployment and business closures caused by the coronavirus pandemic.

The Dow Jones Industrial Average climbed 257.86 points, or 0.8%, to close at 31,188.38. The S&P 500 rose 1.4% to end at 3,851.85, topping its record closing level of 3,824.68 set earlier this month. The technology-heavy Nasdaq Composite jumped 2% to finish at 13,457.25.

Stocks have been rising on enthusiasm about a coming economic recovery as more people are inoculated with COVID-19 vaccines and Washington gets set to try for another round of economic stimulus.

“The market is motivated by two primary influences: the success of vaccine distribution and the economic plan which Biden rolls out,” Kevin Philip, managing director at Bel Air Investment Advisors, a wealth adviser, said in a note. “The economic plan from the incoming administration, bolstered by Democratic control of Congress, is likely to be profoundly accommodative to economic growth and the stock market.”

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Janet Yellen, Biden’s nominee for treasury secretary, told the Senate Finance Committee during her confirmation hearing Tuesday that the incoming administration would focus on winning quick passage of its $1.9 trillion pandemic relief plan.

The plan would include $1,400 cash payments for most Americans. Democrats are also pushing for faster rollout of COVID-19 vaccines, a higher minimum wage for workers and enhanced benefits for laid-off workers. The hope is that another stimulus can carry the economy until later this year, when more widespread vaccinations get life returning to some semblance of normal.

“With Yellen in charge and with an economy that needs a shot in the arm, I think we can expect massive spending combined with continued ultra-low interest rates for years,” Nigel Green, chief executive and founder of financial consultancy deVere Group, said in a note. “This will act as a catalyst for stock markets.”

To be sure, Biden’s Democratic allies will have control of the House and Senate, but only by the slimmest of margins in the Senate. That could hinder chances of the plan passing.

“It is possible that if the (executive) orders are not radical and the negotiations are without blame-game rancor, he could get enough Republicans to pass about half of his fiscal requests, which would be positive for the markets,” John Vail, chief global strategist at Nikko Asset Management, an investment management company, said in a note.

“There is a major debate as to whether many of his programs for a second stimulus bill can be legally passed through the Reconciliation process, so we will watch such, although it may take quite a while,” Vail added.

The yield on the 10-year Treasury rose to 1.09% from 1.07% late Tuesday.

Shares of Netflix rallied 17% after the company said it would no longer need to borrow billions of dollars to finance its TV shows and movies.

Morgan Stanley was virtually flat after the bank reported a stronger-than-expected quarterly profit driven by its trading business. Bank stocks had run up in prior weeks on expectations that a stronger economy later this year and higher interest rates would mean bigger profits from making loans.

Procter & Gamble lifted its full-year sales forecast for a second time, fueled by higher demand for its cleaning products. Shares of the consumer products company fell about 1.2%.

In European stock markets, the German DAX returned 0.8%, and the French CAC 40 rose 0.5%. The FTSE 100 added 0.4% in London.

Elsewhere, Japan’s benchmark Nikkei 225 slipped 0.4%. Hong Kong’s Hang Seng jumped 1.1%, while the Shanghai Composite rose 0.5%.

Contributing: The Associated Press

This article originally appeared on USA TODAY: Biden inauguration: S&P 500 hits record on hopes for more stimulus aid