Wall Street set new records as the Biden presidency finally begins to take shape, though the Covid-19 pandemic remains a looming threat to his administration.
MANHATTAN (CN) — With the Biden presidency officially beginning its transition, the Dow Jones Industrial Average burst through the 30,000-point mark for the first time in history.
At the opening bell, the Dow gained 340 points and by the closing bell it had settled at 30,045 points, a 1.5% increase. The S&P 500 also inched over its previous record high, finishing the day at 3,635 points, a 1.6% increase. The Nasdaq’s 1.3% increase for the day was shy of its previous high of 12,056 points, settling 20 points lower.
Markets in Europe saw a boost across the board on Tuesday, with indices in Germany and France gaining 1.2% and the pan-European Stoxx 600 gaining just under 1%.
Wall Street’s headline news led President Trump to hold possibly his shortest press conference ever. “The stock market’s just broken 30,000. Never been broken, that number. That’s a sacred number, 30,000,” Trump said.
Trump, who claimed during one of the presidential debates that the stock market would crash if Biden were elected, did not take any questions following the roughly 70-second statement.
The Dow has been climbing steadily ever since Election Day, with most gains due to positive vaccine news. Some analysts argue the latest surge is due to the recent electoral certification by several key states, as well as the head of the General Services Administration late Monday finally informing the Biden team it could begin the formal transition to power.
“This renewed push appears to have come about as a result of events in the U.S., where Joe Biden appears to be starting the slow transition process to a new U.S. administration next year, as President Trump somewhat begrudgingly makes life easier by slowly removing the various obstacles to a smooth process,” wrote Michael Hewson, cheif market analyst at CMC Markets.
Hewson noted the news that Biden tapped former Federal Reserve Chair Janet Yellen as the next treasury secretary has boosted Wall Street’s hopes, “raising the hope of a much more consensual approach between the central bank and U.S. administration over the next four years.”
Yellen, who would be the first female treasury secretary, has a history of being a dove when it comes to monetary policy. Her approach would likely meld well with current Federal Reserve Chair Jerome Powell, who similarly favors low interest rates in favor of keeping unemployment low.
“So, we are looking at the next several years of a Treasury Secretary (Yellen) and Fed Chair (Powell) who are both very dovish, and as such that should mean, broadly speaking, more monetary and fiscal support for the economy than we are usually used to,” wrote Tom Essaye of the Sevens Report. “And that should, generally speaking, add to the upward pressure on asset inflation, and that’s why stocks rallied on the announcement yesterday.”
Yellen had been appointed to head the Federal Reserve by President Obama but was ousted by Trump after he instead nominated Powell. The honeymoon period between Trump and Powell soured quickly, though, with the president constantly urging the central banker to slash interest rates and threatening to fire him at the beginning of the Covid-19 pandemic.
While Yellen is considered a dove on monetary policy, her views on fiscal policy are considered different. “In the near term, she will support fiscal stimulus to help lift the economy out of the pandemic hole,” University of Oregon finance professor Tim Duy said Monday.
“Note though that she has a track record as a deficit hawk,” wrote Duy, who monitors the Fed. “Such views would be consistent with my expectation that a Biden administration will eventually pivot toward deficit reduction, but maybe that instinct has been tempered in the last few years.”
The Biden administration is not yet fully coalesced, and Yellen and other nominees face a potentially hostile Republican-led Senate.
Corporate America and Wall Street have largely accepted the fact of a Biden presidency, and in some cases heartily welcomed it as a change of pace from the chaotic to the blasé.
Hours prior to the GSA’s letter of ascertainment on Monday, 164 CEOs from leading New York companies called on the Trump administration to pack it in and officially begin the transition to a Biden presidency.
“Every day that an orderly presidential transition process is delayed, our democracy grows weaker in the eyes of our own citizens and the nation’s stature on the global stage is diminished,” wrote the CEOs, which include Trump supporters Stephen Schwarzman of Blackstone. “Withholding resources and vital information from an incoming administration puts the public and economic health and security of America at risk.”
Biden likely faces a dauting task with out-of-control Covid-19 pandemic as some researchers predict the number of cases could double by Inauguration Day. Even if 20 million cases in January do not fully materialize, the current path of the virus is undeniably going the wrong way.
According to data compiled by Johns Hopkins University, there have been more than 59 million cases of Covid-19 worldwide, with 1.4 million deaths. In the United States, nearly 12.5 million Americans have contracted the disease, while about 258,000 have died.
“We are almost to a vaccine,” U.S. Surgeon General Jerome Adams reportedly told Fox News on Tuesday. “We just need you, the American people, to hold on a little bit longer.”
Hopefully, the wait will not be too much longer, as several promising vaccine candidates are on their way to receiving government approval. Last week, Pfizer and BioNTech officially announced they would soon emergency use authorization from the U.S. Food and Drug Administration for their proposed coronavirus vaccine, which could make doses available for some of the population as soon as mid-December. Candidates from Moderna and AstraZeneca also show promise.
The spike in Covid-19 cases, consumer confidence has dipped. According to the Conference Board, consumer confidence is no longer flat and fell from 101.4 points in October to 96.1 points in November.
“Consumers’ assessment of present-day conditions held steady, though consumers noted a moderation in business conditions, suggesting growth has slowed in Q4,” said Lynn Franco, senior director of economic indicators at the board. “Heading into 2021, consumers do not foresee the economy, nor the labor market, gaining strength.”