Amid dismal data, Dow, Nasdaq hit record highs as focus turns to Biden's stimulus plan3 min read . Updated: 14 Jan 2021, 09:17 PM IST
- President-elect has pledged the plan will include direct payments to individuals that would bring the total to $2,000
- The announcement comes as data showed applications for unemployment benefits rose sharply in the first week of 2021, with a surge of 181,000
The Dow and the Nasdaq hit record highs on Thursday in anticipation of President-elect Joe Biden's pandemic aid proposal to jump-start a struggling economy after data highlighted weakening labor market conditions.
The Labor Department's weekly jobless report showed the number of Americans filing for unemployment benefits increased more than expected last week, underscoring the impact of a resurgence in COVID-19 infections.
Data showed applications for unemployment benefits rose sharply in the first week of 2021, with a surge of 181,000 -- the biggest increase since the coronavirus pandemic began in March -- bringing the total close to the one million level not seen since August.
However, the S&P 500 rose for the seventh time in nine sessions this year as investors count on Biden to unveil a stimulus plan on Thursday evening that could exceed $1.5 trillion.
Last week, 965,000 more U.S. workers filed for unemployment benefits last week as businesses shutter and lay off employees. That’s up sharply from the prior week’s tally of 784,000, and it was much worse than economists expected.
Such discouraging numbers could be fodder for critics of the stock market, who say prices have soared too high and look too expensive. But several analysts said they expect investors to continue to focus on hopes for a brighter future as temperatures warm and more people get vaccines.
“Further, a bleaker than expected jobs report translates into a greater likelihood for a full-throated stimulus package, which perversely acts as a tailwind for the market," said Mike Loewengart, managing director of investment strategy at E-Trade Financial.
"For a while investors have been looking forward to what the picture might be like once the vaccine is fully distributed and the worst parts of the pandemic over," said Rick Meckler, partner, Cherry Lane Investments, a family investment office in New Vernon, New Jersey.
"There is a little bit of a fear of 'sell on the news' that when (stimulus) is actually introduced, it won't be as large as some people like or it's possible that market will start to look at how it's going to be paid for."
Among individual stocks, Delta Air Lines gained about 5% as Chief Executive Ed Bastian forecast 2021 to be "the year of recovery" after the coronavirus pandemic prompted its first annual loss in 11 years.
The S&P 1500 airlines index added 3.4%.
Five of the 11 major S&P sectors rose in early trading with economy-linked energy, financial and industrials gaining the most.
The domestically-focused small-cap Russell 2000 also hit an all-time high.
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 U.S. 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.
At 10:44 a.m. ET, the Dow Jones Industrial Average rose 116.19 points, or 0.38% , to 31,178.17, the S&P 500 gained 11.29 points, or 0.30 %, to 3,821.13 and the Nasdaq Composite gained 81.07 points, or 0.62 %, to 13,210.89.
U.S.-listed shares of Taiwan Semiconductor Manufacturing Co Ltd surged about 10% after posting its best-ever quarterly profit and raised revenue and capital spending estimates to record levels.
The Philadelphia semiconductor index jumped 2.3% 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.
Advancing issues outnumbered decliners by a 3-to-1 ratio on the NYSE and by a 3-to-1 ratio on the Nasdaq.
The S&P 500 posted 37 new 52-week highs and no new low, while the Nasdaq recorded 383 new highs and three new lows.