Dow rises 100 pips, Nasdaq hits document as traders await Biden stimulus package deal unveiling
US stocks rose Thursday as traders weighed a potentially big stimulus package and more good vaccine news against the pressures of weak economic data and political turmoil.
The Dow Jones Industrial Average gained 11 points, led by Boeing, Chevron and Intel, while the S&P 500 rose 0.2%. The tech-heavy Nasdaq Composite climbed 0.4% to hit an all-time high.
President-elect Joe Biden is expected to unveil an economic stimulus plan on Thursday night that will include a $ 600 boost in recent direct payments, an expansion of unemployment insurance, and support from state and local governments. The incentive could be as high as $ 2 trillion, CNN reported.
“Stocks grow profits thanks to continued stability across the ‘three pillars’ (stimulus, vaccines and profits),” Vital Knowledge’s Adam Crisafulli wrote in a note. “The $ 2 number is an in-line number with expectations, and investors need to watch returns very carefully … all of the Trump impeachment noise is largely irrelevant to the markets.”
Study data released Wednesday showed that Johnson & Johnson’s unique coronavirus vaccine is safe and produces a promising immune response.
CNBC’s Jim Cramer said the exchange hadn’t priced in the rosy scenario where the vaccines will get the pandemic under control sometime this year.
“The market didn’t price it in at all,” Cramer said Thursday on CNBC’s Squawk on the Street. “I think there will be animal spirits of people who will even overwrite what we saw on the stock market.”
However, investors also digested data on unemployment claims that came in worse than expected. According to economists polled by Dow Jones, initial unemployment insurance claims rose to 965,000 in the past week, an estimate of 800,000 new claims.
The market stalled in the previous session when members of the House of Representatives voted to indict President Donald Trump a second time – making him the first U.S. president to be indicted twice – when a bipartisan majority accused him of a riot Inciting US Capitol last week.
The slight gains for the S&P 500 and Nasdaq on Wednesday came after Intel rose nearly 7% to lead tech stocks higher. They also followed U.S. interest rates, which fell from their highest level since March 2020.
The benchmark 10-year bond yield was 1.10% on Thursday after hitting a high of 1.18% earlier this week. This fall in interest rates came as Federal Reserve officials determined that monetary policy will remain simple for the foreseeable future.
Interest rates have risen this year amid prospects of increased fiscal stimulus in the US after Democrats secured a majority in both the House and Senate. Inflation expectations have also increased recently.
“We believe US inflation will be higher than expected in the next few years,” wrote Adam Hoyes, Assistant Economist at Capital Economics. “At the same time, we believe investors are overestimating how quickly the Fed will allow monetary conditions to tighten. The new flexible framework for the Fed’s average inflation target suggests that inflation will rise above 2% in the coming years . “”
Subscribe to CNBC PRO for exclusive insights and analysis as well as live business day programs from around the world.