U.S. stocks closed sharply higher Tuesday, with the Dow surpassing the 30,000 landmark, as investors cheered progress towards a COVID-19 vaccine and towards the inauguration of a Biden administration.
However trading volumes were expected to remain subdued ahead of the Thanksgiving holiday on Thursday when markets will be closed, with only half a day of trading scheduled for Friday.
How are stock benchmarks performing?
- The Dow Jones Industrial Average DJIA, +1.53% rose 454.97 points, or 1.5%, at 30,046.24.
- The S&P 500 SPX, +1.61% gained 57.82 points, or 1.5%, to trade at 3,635.41.
- The Nasdaq Composite COMP rose 156.15 points, or 1.3%, to 12,036.79, as tech stocks lagged behind shares of more economically sensitive companies.
On Monday, stocks finished decisively higher on vaccine news:
- The Dow closed up 327.79 points, or 1.1%, to end at 29,591.27
- The S&P 500 rose 20.05 points, or 0.6%, closing a t 3,577.59.
- Nasdaq Composite advanced 25.66 points, or 0.2%, to finish at 11,880.63.
- The Russell 2000 index finished at an all-time high, rising 1.9% to reach 1,818.30.
What’s driving the market?
The crossing of the 30,000 threshold for the Dow on Tuesday, while underscoring the strength of the stock-market rally, has no significance in itself, analysts noted.
“In my view, it is far more interesting to compare the price of an index to the fundamental characteristics (earnings, sales, book value) of the companies within it,” said Brian Levitt, global market strategist at Invesco, in a note.
He noted that in 1999, when the Dow first hit 10,000, the average was trading at nearly 30 times earnings per share — a once-in-a-generation high. When it next hit 10,000 in 2009, the Dow was trading at 12 times earnings, its lowest valuation in nearly 40 years. On Monday, the Dow is trading at 29 times per share.
Still, President Donald Trump called the 30,000 mark a “sacred number” shortly after the milestone was reached.
Upward momentum for equity markets, and especially shares in more cyclical industries like energy that were the slowest to rally since March, was being attributed in part to the Trump administration clearing the way for President-elect Joe Biden’s transition to the White House.
“Vaccine expectations along with political certainty has buoyed the cyclical trade,” said Todd Jablonski, chief investment officer at Principal Global Asset Allocation, in an interview.
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Although investors have been preparing for a Biden presidency, the move eases worries over a bumpy transition even as Trump continues to refuse to concede the race. Meanwhile, Trump’s efforts to overturn the results of the Nov. 3 election have met a series of legal defeats and setbacks.
Analysts said investors continue to shrug off the surge in COVID-19 cases, and their potential near-term economic impact, as they focus instead on positive developments toward a vaccine and the prospect that companies whose earnings have suffered during the pandemic may revive.
“The marketplace has been looking through the negatives of the virus impact and are seeing the light at the end of the tunnel,” said David Norris, a portfolio manager at TwentyFour Asset Management, in an interview.
Markets may also have received a boost from reports late Monday that former Federal Reserve Chairwoman Janet Yellen is Biden’s pick for Treasury secretary.
Yellen is considered an experienced economist and administrator who helped the markets and the economy navigate the recovery from the 2008 financial crisis. She would be the first woman to serve as U.S. Treasury secretary.
Some analysts see the selection of Yellen as raising the likelihood of further fiscal measures to support the economic recovery from the COVID-19 pandemic.
Gains for markets on Monday were mostly fueled by fresh reports on progress toward a vaccine, with the University of Oxford and AstraZeneca saying their coronavirus vaccine candidate was found to have as much as a 90% efficacy rate in preventing infections without serious side effects in a late-stage trial.
Progress on COVID-19 vaccines has buttressed optimism on Wall Street at a time when coronavirus cases are rising in 45 U.S. states. The global tally for confirmed coronavirus cases climbed to 59.3 million on Tuesday, according to data aggregated by Johns Hopkins University, while the death toll rose to 1.39 million. The U.S. has the highest case tally in the world at 12.4 million and the highest death toll at 257,707, or more than a fifth of the global total.
The U.S. Case-Shiller House Price Index rose at a 6.6% annual pace in September.
Stocks extended gains, despite a fall in the Conference Board’s consumer-confidence index from 101.4 to 96.1, a three-month low after a record wave of coronavirus cases spurred some cities and states to reimpose restrictions and Americans took greater precautions.
Which companies are in focus?
- J.M. Smucker SJM, +1.49% lifted sales guidance as earnings topped estimates. Shares rose 1.5%.
- Best Buy BBY, -6.96% topped earnings estimates as same-store sales jumped 23%. Shares fell 7%, however.
- Tesla‘s stock TSLA, +6.42% rallied 6% a day after an analyst raised his target for the electric-vehicle maker’s stock to $1,000. The company’s market cap is now worth more than $500 billion.
- Shares of General Electric Co. GE, +3.77% ran up to a nine-month high after an analyst said the industrial conglomerate had “clearly set a positive direction” after years of struggles. Shares rose 3.7%.
What are other markets doing?
- In Asian markets, Hong Kong’s Hang Seng Index HSI, 0.20% rose 0.4%, while the Shanghai Composite SHCOMP, -1.19% advanced 0.3% and Japan’s Nikkei 225 NIK, +0.50% jumped 2.5%.
- In Europe, the Stoxx 600 Europe index SXXP, +0.91% rose 0.9%, while London’s FTSE 100 UKX, +1.55% advanced 1.6%.
- The yield on the 10-year Treasury note TMUBMUSD10Y, 0.880% rose 2.4 basis points to 0.88%. Yields and bond prices move in opposite directions.
- The ICE U.S. Dollar Index DXY, -0.16% was down 0.2%.
- Oil futures extended gains, with the global benchmark BRN00, 1.21% and the U.S. benchmark CL00, 1.07% settling at their highest levels since March. Gold was under pressure, with futures GC00, 0.17% losing 1.8% to settle at $1,804.60 an ounce, its lowest level since mid-July