Dow and Nasdaq hit record highs ahead of Biden’s stimulus speech
The Dow and the Nasdaq hit record highs on Thursday ahead of president-elect Joe Biden's pandemic stimulus speech to jump-start a struggling US economy after data highlighted weakening labour market conditions.
The labour department's weekly jobless report on Thursday showed the number of Americans filing first-time claims for unemployment benefits increased more than expected last week, underscoring the impact of a resurgence in Covid-19 infections. Initial claims for state unemployment benefits totalled a seasonally adjusted 965,000 for the week ended January 9, compared with 784,000 in the prior week.
The S&P 500 rose for the seventh time in nine sessions this year as investors count on Biden to unveil a stimulus plan that could exceed $1.5-trillion.
“We're really focused on the stimulus measures so we largely ignored the fact that we also had a really big spike in jobless claims,” said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors in Newport Beach, California.
“Perhaps it's back to bad news is good news situation where market expects that deteriorating economic data will motivate lawmakers to issue even more stimulus.”
Delta Air Lines gained 3.6% as CEO Ed Bastian forecast 2021 to be “the year of recovery” after the coronavirus pandemic prompted its first loss in 11 years.
The S&P 1500 airlines index added 3.3%.
Eight of the 11 major S&P sectors rose with economy-linked energy, financial and industrials among the biggest gainers.
The domestically focused small-cap Russell 2000, as well as the Dow Jones Transports index, considered a barometer of economic health, both scaled all-time highs.
Analysts have said near-term political uncertainties in Washington, a relentless rise in coronavirus cases and a slower than expected rollout of vaccines could impede gains for equities in the short term.
Meanwhile, President Donald Trump became the first president in US history to be impeached twice when the House voted 232-197 on Wednesday to charge him with inciting riots at the Capitol. The impeachment proceedings threaten to hang over the beginning of Biden's term.
“With the current political situation, which is Biden and the Democratic Senate, it seems like there's really not going to be a whole lot that can deter the rally from continuing,” Gokhman said.
“I don't think the delay (in fiscal aid) of a few weeks due to impeachment trial is necessarily going to derail the further economic boost that we're going to get from the stimulus.”
Dow Jones Industrial Average rose 115.85 points by midday, or 0.37%, to 31,176.32, the S&P 500 gained 6.29 points, or 0.17%, to 3,816.13 and the Nasdaq Composite climbed 55.56 points, or 0.42%, to 13,184.51.
US-listed shares of Taiwan Semiconductor Manufacturing Company surged 12% after the company posted its best-ever quarterly profit and raised revenue and capital spending estimates to record levels.
The Philadelphia semiconductor index jumped 3% to a record high.
Attention is shifting to the earnings season with results from JPMorgan, Citigroup and Wells Fargo slated for Friday.
First-quarter and 2021 corporate guidance will be key for investors as new lockdowns threaten to push back a recovery in corporate earnings, according to investment banks.
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