US Stocks Finish Higher but Set Up For Volatile Start to New Year

by Warrior2

President Biden will have two major issues on his hands:  Stop the spread of the virus and get more fiscal aid to struggling Americans.

The major U.S. stock indexes moved higher on Wednesday, closing just below record levels reached the previous session as investors continued to bet on a strong economic recovery in 2021 on the back of COVID-19 vaccine rollouts and hopes for even more fiscal stimulus when President-elect Joe Biden takes office on January 20.

In the cash market, the benchmark S&P 500 Index settled at 3732.04, up 5.00 or +0.15%. The blue chip Dow Jones Industrial Average finished at 30409.56, up 73.89 or +0.27% and the technology-driven NASDAQ Composite closed at 12870.00, up 19.78 or +0.18%.

New Stimulus Delayed Again

Investors seemed to shrug off the news that Senate Majority Leader Mitch McConnell blocked a quick vote to back President Donald Trump’s call to increase COVID-19 checks. Near-term expectations of bigger stimulus checks dimmed on Wednesday after McConnell introduced a bill that tied increased $2,000 stimulus checks with the removal of protections for social media companies and a study on election security.

The move strongly suggests that McConnell is perfectly willing to pass on the business of additional stimulus to the new Congress that takes office in early January. That’s an especially risky move, however, because of the high-stakes raised by the January 5 U.S. Senate runoffs in Georgia that threaten to shift the balance of power in Congress to the Democrats.Advertisement

Optimism Over Vaccine Rollouts Despite New Coronavirus Headwinds

Early Wednesday, optimism over vaccine rollouts was boosted after Britain approved the emergency use of AstraZeneca and Oxford University’s COVID-19 vaccine, but this news was tempered somewhat by the first known U.S. case of a highly infectious coronavirus variant discovered in Britain that was now detected in Colorado and California.

This story could take center stage early in the year as coronavirus cases in the United States are expected to surge after the Christmas and New Year holidays, leading some to predict heightened volatility in the stock market since it looks like this development could lengthen the recovery period in the U.S.

With the rollout of the vaccines, optimistic investors began to price in a speedy recovery and that conditions would improve shortly after the first quarter. A surge in coronavirus cases and signs that the impact of the infections could linger may force investors to push forward the recovery into perhaps the summer.

Volatility Ahead as Bulls Bet on Stimulus, Bears See Greater Restrictions

When President-elect Joe Biden takes office on January 20, he’ll have two major issues on his hands:  Stop the spread of the virus and get more fiscal aid to struggling Americans.

Investors still aren’t sure what Biden can do to stop the spread of the virus, but some believe he may call for stricter restrictions and lockdowns. This news will prolong the economic recovery. In combination with the restrictions, Biden will try to pass even larger stimulus packages to help ease the impact of the restrictions. Biden will get his way if the Democrats win control of the Senate since they already own the House of Representatives.

The volatility will come from a possible steep correction because of new restrictions and the strong rebound due to additional stimulus.

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