For prospective investors, the Democratic bid in the Senate, which gives control of the party to the White House and Congress, was the most important news in recent days. Control of the three branches of government gives an advantage to the Biden administration’s agenda, which could mean faster and more generous approval of additional incentives to revive the economy.
That news surpassed the shocking images of supporters of Trump supporters storming the U.S. Capitol building on Wall Street. The Dow surpassed 31,000 points last Wednesday for the first time in history and closed the all-time high.
Optimism on Wall Street is not a total surprise. Historically, U.S. equities have not been moved by civil unrest as long as the turbulence has no tangible impact on gains or economic growth.
Shares rose on Thursday in New York’s first bell and managed to maintain their strong gains as the session continued. He S&P 500 (SPX), the broadest measure of the US equity market, rose 1.4% and the Nasdaq Composite (COMP) it shot up 2.3% at noon.
He Dow (NOT SOLD) increased 0.8%, or 258 points, around noon.
If the market closed at current levels, the Dow would register its first place above 31,000 points and the Nasdaq would close above 13,000 points for the first time in history.
But anyone who is worried may rise too fast for their own good can breathe, said Thomas Mathews, market economist at Capital Economics. “We still don’t think stock prices seem too high relative to expected gains,” Matthews said in a note to clients.
Interest rates remain low for now, which is good news for stocks, as it means debt is cheap for companies and investors have few other compelling options.
In addition, vaccine deployment and potential additional government stimulus will lead to a strong recovery later in 2021, he said.
The economic data for the day was also better than expected, with lower-than-expected unemployment claims and a stronger-than-expected December index of service purchasing managers in December.