MANHATTAN (CN) — Punctuated by the progression in the Senate of a nearly $2 trillion stimulus package and the seeming end to the GameStop saga, Wall Street enjoyed one of its best weeks since November.
The Dow Jones Industrial Average gained about 1,100 points for the week — increasing steadily each day — though it is still lower than its previous record high from last month. The S&P 500 and Nasdaq have had similar runs. The Nasdaq gained nearly every day, losing only a couple of points on Wednesday, to finish the week with a 786-point increase. The S&P 500 gained 172 points to hit a new record of 3,886 points.
Markets have been quick to put the furor over last week’s GameStop short squeeze behind them. Shares of the video game company, which at one point reached nearly $500, have dwindled down to $63 per share as retail investors and institutional investors pulled out of their positions.
On Friday, traders once again moved in on GameStop when retail investment platform Robinhood removed trading limits on the stock. The company’s shares gained 10% in the day’s trading.
Regulators are now closely scrutinizing all sides of the phenomenon, including whether Robinhood unfairly limited trades and whether investors used chatrooms and message boards to coordinate a pump-and-dump scheme with the stock.
On Thursday, newly confirmed Treasury Secretary Janet Yellen met with members of the Securities and Exchange Commission, Commodity Futures Trading Commission and the Federal Reserve to discuss the recent short squeezes. In a statement following the meeting, the Treasury noted that “the core infrastructure was resilient during high volatility and heavy trading volume,” and that regulators would continue to examine the trades.
Investors also likely were pleased with progress on the stimulus front. In the early Friday morning hours, Vice President Kamala Harris broke the 50-50 tie in the Senate to pass a third stimulus package via reconciliation. The bill, which currently has a $1.9 trillion price tag, returned to the House this afternoon where it passed for the second time. It won’t go to the president’s desk, however, until it works its way through congressional committees — possibly chipping away at its many offerings before it faces yet another vote by the full Senate.
“It will be harder to get all 50 Democratic senators to support the full $1.9 trillion package, which is why we still think the final stimulus will be a more modest $1 trillion and will have the proposed minimum wage hikes omitted,” wrote Paul Ashworth, chief U.S. economist at Capital Economics.
Democratic Senator Joe Manchin of West Virginia is considered iffy for supporting the $1,400 stimulus checks or minimum wage hike.
All told, equity markets have had a phenomenal January, and some experts see that fact as a good omen.
“We’ll never fully rely on just one indicator, but ‘so goes January so goes the year’ is ingrained enough in investors’ minds that it’s worth putting in historical context,” wrote Jessica Rabe, co-founder of DataTrek Research.
Since 1980, when the S&P 500 has been positive in January it has also had a positive annual return in more than four out of five of those years, Rabe found. Even when the S&P had a sour January, about 63% of those years turned out well in the end for the index.
The index has had “very bad” January returns of negative 5% or less five times since 1980, Rabe’s research found. The S&P has been “slightly bad” —or down up to 2% — five times in that time span, Rabe found, including last month, when it lost 1.1%.