U.S. stocks gained Thursday morning as traders shook off Wednesday’s unrest in Washington and looked ahead to the policy implications of the incoming presidential administration and Congress.
The Dow added more than 150 points, or 0.5%, shortly after the opening bell. Overnight, Congress certified President-elect Joe Biden’s victory in the Electoral College and formally recognized him as the next president, with lawmakers reconvening hours after protesters supporting President Donald Trump swarmed inside the Capitol and forced the building to lock down and lawmakers to evacuate.
President-elect Joe Biden called the event an “insurrection” in remarks to the nation. Trump later told the protesters to “go home,” but reiterated baseless claims that the “election was stolen from us,” in a video address now removed by Twitter, Facebook and YouTube. Business leaders including JPMorgan Chase CEO Jamie Dimon and Blackstone CEO Stephen Schwarzman, who has long backed Trump, condemned the violence.
Despite the turmoil, the Dow ended at a record closing high on Wednesday, and the S&P 500 gained 0.6%.
“When I look at the market reaction here … there is a recognition here that there is a certain inevitability in terms of what happens on January 20,” Raymond James analyst Ed Mills told Yahoo Finance on Wednesday. “It’s not as if there’s a situation based upon any protest that keeps Donald Trump as president at this point.”
“The market is more focused on, what are the policies of the next two years with the Congress that was voted in with the final election last night? What are the policies over the next four years?” Mills added. “They’re looking at COVID, they see vaccines being distributed. They are looking at a reopening.”
Wednesday afternoon, the Associated Press reported Democrat Jon Ossoff was the winner of the second Georgia Senate runoff election, defeating incumbent Republican David Perdue. Democrat Raphael Warnock was called as the victor of the Senate race against incumbent Republican Kelly Loeffler earlier in the day. This gave Democrats a very narrow majority in the chamber when considering Vice President-elect Kamala Harris’s ability to cast tie-breaking votes.
Financial, materials and energy stocks extended gains as prospects amid the Democratic sweep, given assumptions that a unified Democratic government would advance more virus-relief stimulus and increase infrastructure spending. Cannabis and clean-energy stocks including electric-vehicle makers also gained on optimism for more policies amenable to these industries under a Democratic House and Senate.
“Our U.S. economists have indicated that a Democratic Senate would likely lead to another large fiscal stimulus package, possibly including some priorities of the new administration such as infrastructure,” Deutsche Bank economists said in a note Wednesday. “They see that as a material upside to their GDP forecast, which they currently see rising 4.3% Q4/Q4 in 2021.”
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10:15 a.m. ET: Service sector expands at fastest rate in three months in December: ISM
The U.S. service sector expanded more than anticipated in December, marking a seventh straight month of expansion, according to the Institute for Supply Management.
ISM’s services purchasing managers’ index (PMI) came in at 57.2 for the month following a print of 55.9 in November. Consensus economists were looking for a the index to read 54.5 in December, according to Bloomberg data.
The increase came as new orders, supplier deliveries and inventories increased markedly in the service sector in December. A subindex tracking services employment however, dipped back into contractionary territory, or below the neutral level of 50.0.
“The headline services reading received an artificial boost from a jump in the supplier deliveries component, which reflects virus-related disruption rather than stronger demand,” Andrew Hunter, senior U.S. economist for Capital Economics, said in an email Thursday. “But the business activity and new orders components also picked up, which is at odds with the generally downbeat tone of the comments in the press release and with the recent dips in the other services-sector surveys, including most of the regional Fed indices and the Markit services PMI.”
“While both of last month’s ISM surveys have been much better than expected, we already know that real consumption fell in November and the latest high-frequency data point to a further decline in December,” he added.
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9:34 a.m. ET: Stocks open higher
Here were the main moves in markets, as of 9:34 a.m. ET:
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S&P 500 (^GSPC): +31.15 points (+0.83%) to 3,779.29
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Dow (^DJI): +144.6 points (+0.47%) to 30,974.00
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Nasdaq (^IXIC): +169.65 points (+1.31%) to 12,907.12
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Crude (CL=F): +$0.07 (+0.14%) to $50.70 a barrel
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Gold (GC=F): +$11.60 (+0.61%) to $1,920.20 per ounce
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10-year Treasury (^TNX): +3.2 bps to yield 1.074%
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8:30 a.m. ET: New jobless claims unexpectedly fell last week
New jobless claims unexpectedly steadied below 800,000 at the turn of the new year but still held at a historically elevated level, as the labor market struggled to regain traction amid the ongoing pandemic.
New weekly unemployment claims came in at 787,000 for the week ended January 2, the Labor Department reported Thursday morning, topping estimates for an increase to 800,000. The prior week’s level was revised up by 3,000 to 790,000. New jobless claims had topped 800,000 for three of the four full weeks of December.
Continuing claims, measuring all individuals still on regular state unemployment programs, unexpectedly fell more than expected to nearly 5.1 million.
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7:43 a.m. ET: ‘Markets might care about impeachment’: UBS
After the violent pro-Trump protests at the U.S. Capitol on Wednesday, a growing number of Republican lawmakers have reportedly considered taking draconian measures to remove Trump from office, with fewer than 14 days left of his term. Representative Ilhan Omar, a Democrat from Minnesota, said she was drawing up Articles of Impeachment in the House of Representatives.
Others have reportedly considered invoking the 25th Amendment of the Constitution, or determining Trump unable to do his job and thereby transferring power to Vice President Mike Pence.
“There are media reports that the 25th Amendment of the Constitution may be invoked, or that fresh impeachment proceedings could be launched against US President Trump,” UBS economist Paul Donovan said in a note Thursday. “This would probably not impact policy, but markets might care about impeachment (as conviction could bar US President Trump from future office).”
But the events of Wednesday could also have a psychological impact on investors as well, he added.
“Many international investors come from countries with very different experiences of democracy, regime change, and the stability of the nation state from that of the United States,” Donovan said. “It is perhaps inevitable that such investors will view events in the US through the prism of their own experiences, and this may increase the risk that they see in U.S. assets.”
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7:22 a.m. ET Thursday: Stocks point to a higher open, Nasdaq looks to recover some losses
Here were the main moves in markets, as of 7:22 a.m. ET Thursday:
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S&P 500 futures (ES=F): 3,753.5, up 13 points or 0.35%
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Dow futures (YM=F): 30,780.00, up 60 points or 0.2%
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Nasdaq futures (NQ=F): 12,707.00, up 90.25 point or 0.72%
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Crude (CL=F): +$0.19 (-0.38%) to $50.82 a barrel
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Gold (GC=F): +$10.10 (+0.53%) to $1,918.70 per ounce
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10-year Treasury (^TNX): +0.7 bps to yield 1.049%
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6:06 p.m. ET Wednesday: Stock futures open mostly higher
Here were the main moves in markets, as of 6:06 p.m. ET Wednesday:
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S&P 500 futures (ES=F): 3,753.25, up 12.75 points or 0.34%
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Dow futures (YM=F): 30,793.00, up 73 points or 0.24%
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Nasdaq futures (NQ=F): 12,672.5, up 55.75 point or 0.44%
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