US stocks give 'collective shrug' to hit new record after Washington violence

'You’re seeing a reflation trade on the assumption that a more progressive, and aggressive, fiscal stimulus packages could be in the offing'
US stocks give 'collective shrug' to hit new record after Washington violence

Economy-linked financials jumped, while industrial and materials sectors hovered near record highs

Wall Street hit record levels today as market participants bet on more coronavirus relief aid under a Democrat-controlled US Congress to help the economy ride out a steep pandemic-led downturn.

Economy-linked financials jumped, while industrial and materials sectors hovered near record highs on expectations that president-elect Joe Biden would line up a bigger fiscal package and boost infrastructure spending.

“You’re seeing a reflation trade on the assumption that a more progressive, and aggressive, fiscal stimulus packages could be in the offing,” said Keith Buchanan, portfolio manager at GlobAlt in Atlanta.

Rate-sensitive bank shares gained, while the S&P 500 technology group rose strongly, and was set to more than make up for its losses from a day earlier, when shares of some of the biggest technology companies dropped on fears of increased regulation. The so-called Faang group of stocks that have led the Wall Street rally from pandemic lows, gained by over 2%. 

Congress certified Mr Biden’s election victory, hours after hundreds of president Donald Trump’s supporters stormed the US Capitol in a harrowing assault on American democracy that briefly weighed on markets.

The number of Americans filing for jobless benefits unexpectedly dipped last week, while staying elevated, a US labour department report showed, with the job market recovery appearing to stall as Covid-19 threatens to overwhelm the country.

“With more stimulus coming, even if we do have a miss on claims, it’s going to be a little bit less severe, because we know there’s going to be a bigger back up for those who are recently unemployed,” said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors in California.

Chris Beuchamp, chief market analyst at online broker IG, said that almost equity sectors were "in high demand" after Wednesday's chaos in Washington failed to weigh on stockmarkets around the world "now that Joe Biden is the undisputed winner of the US election and has control of the Senate as well as the lower house". 

"US stocks continue to be the global favourite, with plenty of inflows that ultimately imply that hedging from asset managers around the globe will continue to bear down on the US dollar, providing yet another tailwind for this seemingly-unstoppable equity rally," Mr Beauchamp said. 

He said that markets gave a collective shrug at the sight of the turmoil in the US Capitol building, "viewing it as the last spasm of the outgoing administration".  

  • Reuters and Irish Examiner

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