Stocks soar as Wall Street looks past Washington violence
Stocks are rallying sharply on Thursday, as Wall Street continues to be unfazed by the prior day’s violent clashes on Capitol Hill.
For forward-looking investors, the Democratic sweep in the Senate, which gives the party control of the White House and Congress, was the most important news of the past few days. Control of all three branches of government gives the incoming Biden administration’s agenda an advantage, and it could mean swifter and more generous passing of additional stimulus to get the economy back on track.
That news outweighed the shocking images of rioting Trump supporters storming the US Capitol building on Wall Street. The Dow on Wednesday climbed past 31,000 points for the first time in history and closed at an all-time high.
The optimism on Wall Street isn’t a total surprise. Historically, US stocks have been unmoved by civil unrest as long as the turmoil has no tangible impact on earnings or economic growth.
The market continued to reflect this optimism on Thursday, even as Corporate America was busy condemning the riots. All three major stocks indexes were on track for a record-breaking day.
Stocks rose at the opening bell in New York on Thursday and managed to hold onto most of its sharp gains as the session went on.
The S&P 500, the broadest measure of the US equities market, was up 1.4% while the Nasdaq Composite soared 2.4% in the early afternoon. The Dow rose 0.7%, or 205 points, around midday.
If the market were to close at current levels, the Dow would log its first finish above 31,000 points, and the Nasdaq would close above 13,000 points for the first time in history.
But are stocks rising too fast for their own good?
Goldman Sachs CEO David Solomon is concerned of “some excess in the market,” he told Axios in an interview.
But others like Thomas Mathews, market economist at Capital Economics, aren’t as worried: “We still don’t think equity prices look too high relative to expected earnings,” he said in a note to clients.
Interest rates remain low for now, which is good news for stocks because it means borrowing is cheap for companies and investors have few other compelling options.
On top of that, the vaccine rollout and potential additional government stimulus will spark a strong recovery later in 2021, Mathews said.
The economic data of the day came in better than expected as well, with lower-than-predicted jobless claims for last week, and a stronger-than-expected December services purchasing managers’ index.
