U.S. stocks were sharply higher Wednesday morning, with both the S&P500 and Nasdaq posting new intraday records, amid a parade of corporate earnings results and ahead of the inauguration of Joe Biden as the 46th U.S. president.
How are stock benchmarks performing?
- The Dow Jones Industrial Average DJIA, 0.69% rose 179 points to reach 31,109, a gain of 0.6%.
- The S&P 500 index SPX, 1.08% climbed 40 points, or 1.1%, to 3,839, a new intraday record
- The Nasdaq Composite COMP, 1.67% rose to a new intraday record, gaining about 220 points to reach 13,418, an increase of 1.7%.
On Tuesday, stocks posted modest gains to start the holiday-shortened week. The Dow closed 116.26 points, or 0.4%, higher to end at 30,930.52, the S&P 500 index gained 30.66 points, or 0.8%, closing at 3,798.91, while the Nasdaq Composite Index advanced 198.68 points, or 1.5%, to finish at 13,197.18.
What’s driving the market?
Stocks are trading near record highs Wednesday as Biden is scheduled to be sworn in at a scaled-down ceremony that begins at noon Eastern Time in Washington, ending a tumultuous four years under the Trump administration.
The incoming president has laid out plans for a $1.9 trillion COVID-19 relief package, which includes direct payments to Americans and funds set aside for testing and vaccine distribution, to help confront the economic shock from the deadly pandemic. He will likely face challenges getting his legislative agenda across the finish line with the Senate split 50-50 between Republicans and Democrats, with Vice President-elect Kamala Harris set to provide the tiebreaker.
Biden also faces the task of attempting to heal the country after riots on the Capitol two weeks ago rattled the nation. About 25,000 national troops are securing the inauguration event after Trump supporters stormed the seat of government, resulting in five deaths. The incoming president’s outdoor address, according to reports, will emphasize the need for unity amid deep divisions in American politics.
Biden has already announced a number of executive orders to reverse some of Trump’s legislation, including rejoining the World Health Organization and the Paris climate accord. He will also end bans on travel from 13 Muslim-majority and African nations.
Biden’s main focus, however, will be also combating the coronavirus pandemic, as the raging virus in the U.S. registered a grim milestone of 400,000 deaths Tuesday. The U.S. fell short of its goal of vaccinating 20 million people by the end 2020. While the Trump administration’s Operation Warp Speed delivered over 31.1 million doses across the country, only 12.3 million people have received the vaccine.
The Wall Street Journal reported that Biden will extend a pause on interest and principal payments for federal student loans until the end of September, keeping in place restrictions on evictions and foreclosures, and mandating the wearing of face masks on federal property and for interstate travel on airlines, trains and transit systems.
Andrew Smith, chief investment strategist of Dallas-based Delos Capital Advisors, expects the cyclical rotation into sectors like energy XLE, -0.16%, financials XLF, -0.52%, and materials XLB, 0.07% to continue, but for any gains for the market as a whole to be a “grind.”
Smith expects that to drag on “until the vaccine rollout becomes more widespread and we get more clarity on the earnings recovery,” he said in an interview, but added, “it could be months before that happens.”
In the meantime, Smith thinks inflation could take investors by surprise, possibly becoming a drag on consumer spending as soon as the second quarter.
Investors are also parsing earnings reports from the likes of Netflix as well as those from Morgan Stanley, and Dow components UnitedHealth and P&G.
Which stocks are in focus?
- Shares of UnitedHealth Group Inc. UNH, -0.56% slipped 0.6% Wednesday, even after the health care services company reported a fourth-quarter profit that fell less than expected, while revenue rose above forecasts.
- Procter & Gamble Co. PG, -1.38% sales surged in the most recent quarter, fueled in part by demand for high-end household products.
- Shares of Alibaba Group Holding Ltd. BABA, 5.57% shot up 5.4% Wednesday, putting them on track for a fifth-straight gain, after co-founder Jack Ma made his first public appearance in nearly three months
- Tyson Foods Inc. TSN, 2.50% said Wednesday it has agreed to settle all class claims in its previously disclosed broiler chicken antitrust litigation and will pay an aggregate of $221.5 million in settlements.
- Shares of renewable energy company Gevo Inc. GEVO, -24.12% tumbled in early tradeWednesday, after the company said it is selling $350 million of shares in a registered direct offering priced at-the-market
- Netflix Inc. NFLX, 14.13% reported 8.5 million net new subscribers late Tuesday in its fourth quarter, a dramatic uptick from the 2.2 million reported in the previous quarter and well ahead of company and analyst estimates. Shares surged more than 13%.
- Tesla Inc. TSLA, -0.47% shares ticked up after a price-target increase, to $1,000 a share, by Oppenheimer analysts. That would represent roughly 17% upside.
- Fastenal Co. FAST, -3.91% said demand for equipment used to safeguard against the coronavirus gave it a boost in the fourth quarter.
- Morgan Stanley MS, 0.37% shares rose 0.4%, after blowing past estimates for its fourth quarter. The bank said it had net income of $3.4 billion, or $1.81 a share, in the quarter, up from $2.2 billion, or $1.30 a share, in the year-earlier period.
What are other markets doing?
- The yield on the 10-year Treasury note TMUBMUSD10Y, 1.093% rose 1 basis point to 1.102% on expectations of reflation. Yields and bond prices move in opposite directions.
- The ICE U.S. Dollar Index DXY, -0.05% a measure of the currency against a basket of six major rivals, was virtually unchanged at 90.53.
- Oil futures moved higher, with the U.S. benchmark CL00, 0.64% gaining 1.1% to $53.54 a barrel on stimulus expectations. Gold futures GC00, 1.48% were up 1%, to $1,858.40 an ounce.
- European equities were higher. The Stoxx 600 Europe index SXXP, 0.77% gained 1%, while London’s FTSE 100 UKX, 0.30% rose 0.2%.
- In Asia, the Shanghai Composite SHCOMP rose 0.5%, while Hong Kong’s Hang Seng Index HSI, +1.08% surged 1.1% and Japan’s Nikkei 225 NIK, -0.38% closed 0.4% lower.