By Sunny Oh and Mark DeCambre
Major U.S. equity indexes on Monday wrapped up trade at all-time highs as investors drew optimism from President Donald Trump ending a standoff over the weekend and signing a coronavirus aid bill that will soon send direct payments to Americans.
Markets will end the week on Thursday due the New Year’s holiday on Friday.
Stocks put in a mixed performance (link) in holiday-shortened trading last week, with markets closed Friday for Christmas Day after an early finish on Thursday.
Markets started the final week of 2020 on solid footing in the second day of a so-called Santa Claus rally that was at least partly propelled higher on the completion of a closely followed fiscal spending package that is seen as a key support for a healthy market and the economy in the near term, amid the viral pandemic.
Trump’s decision late Sunday to sign the aid package (link) came as a relief to stock-market investors who had been blindsided by his demands late last week that lawmakers raise checks to households to $2,000 from $600. Trump was pressured by lawmakers from both parties, who had negotiated the legislation with the administration. There were still efforts afoot toward a higher direct payment for qualified Americans but it is unclear if that will get traction in the Senate.
“Optimism rests most immediately on passage of the $900 billion fiscal rescue package that Congress recently agreed to and President Trump signed Sunday, wrote Mark Zandi, chief economist at Moody’s Analytics, in a research note.
Read: As stocks hit new highs, ‘one of the most important tailwinds for equities’ is in place (link)
The current fiscal package includes $1.4 trillion to fund government agencies through September and averts a federal government shutdown.
“While the benefits of the relief bill won’t be reflected in December data that we will see next week, the direction of least resistance remains higher,” said James Meyer, chief investment officer at Tower Bridge Advisors, in a note.
Travel-related stocks were among Monday’s big winners, with the U.S. Global Jets ETF(JETS), an exchange-traded fund, including some of the biggest airlines, gaining 0.8%. Airlines are among the companies that have been the most beaten down during the viral outbreak and are seen as due for a rebound as the economy improves and vaccines are deployed.
“After a tough start the economy should have a much better 2021; the bar couldn’t be any lower,” Zandi wrote. “On the other side of the pandemic, in summer 2021, the economy’s prospects should improve markedly,” the economist wrote.
However, some of the popular winners of the pandemic era, notably large-capitalization tech-oriented stocks, also led gainers on Monday, with the S&P 500’s tech sector closing up 1.2% and communication services rising 1.9%.
Meyer said much of the week’s trading should remain quiet with investors seeing clear resolution on a months long saga over a fiscal relief bill.
See: Stock-market pros are having a tough time imagining an S&P 500 slump in 2021 (link)
Markets will be shut Friday for the New Year’s Day holiday.
Bulls expect stocks to get a modest seasonal lift from a “Santa Claus rally,” referring to a phenomenon that runs the last week of December and the first two trading days of January.
Read:’Santa Claus’ rally has begun. Why few 7-session stretches are better for the stock market (link)
Market participants will also closely eye the trajectory of COVID-19 after health care experts warned that a postholiday bump in infections was likely after Americans traveled across the country for Christmas. The U.S. tally (link)of coronavirus cases topped 19 million.
William Watts contributed to this report.
-Sunny Oh; 415-439-6400; AskNewswires@dowjones.com
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