U.S. stocks traded near record territory Wednesday at midday, after both the S&P 500 and Nasdaq posted new intraday highs, as Joe Biden was sworn in as the 46th U.S. president.
Earlier in the session, a parade of encouraging corporate earnings also helped stoke optimism about the path to recovery.
On Tuesday, stocks posted modest gains to start the holiday-shortened week. The Dow closed 116.26 points, or 0.4%, higher to end at 30,930.52, the S&P 500 index gained 30.66 points, or 0.8%, closing at 3,798.91, while the Nasdaq Composite Index advanced 198.68 points, or 1.5%, to finish at 13,197.18.
Stocks were trading near record highs Wednesday at midday as Biden was sworn in as president, with a vow to wrestle the ailing economy from the clutches of the pandemic and end a tumultuous four years under the Trump administration.
The incoming president spoke of the need for unity, while also pledging to fight for racial justice and to reject extremists and white supremacy.
“We must end this uncivil war that pits red against blue, rural versus urban,” Biden said. “In the work ahead of us, we are going to need each other.”
Last week, Biden laid out plans for a $1.9 trillion COVID-19 relief package, which includes direct payments to Americans and funds set aside for testing and vaccine distribution, to help confront the economic shock from the deadly pandemic.
And on Tuesday, the S&P 500 index snapped a three-session slide after Biden’s Treasury Secretary nominee Janet Yellen endorsed Biden’s push to “act big,” in terms of providing additional fiscal stimulus to help bridge the economy through the pandemic.
“That’s giving hope for the economy to recover,” Peter Cardillio, chief market economist at Spartan Capital, told MarketWatch. “The market is rallying on hopes for a speedier recovery.”
Even so, Biden likely faces challenges getting his legislative agenda across the finish line with the Senate split 50-50 between Republicans and Democrats, with Vice President-elect Kamala Harris set to provide the tiebreaker.
Biden also will be tasked with healing the country after riots on the Capitol two weeks ago rattled the nation. About 25,000 national troops secured the inauguration event after Trump supporters stormed the seat of government, resulting in five deaths.
The incoming president already announced a number of executive orders to reverse some of Trump’s legislation, including rejoining the World Health Organization and the Paris climate accord. He also will end bans on travel from 13 Muslim-majority and African nations.
Biden’s main focus, however, will be also combating the coronavirus pandemic, as the raging virus in the U.S. registered a grim milestone of 400,000 deaths Tuesday. The U.S. fell short of its goal of vaccinating 20 million people by the end 2020. While the Trump administration’s Operation Warp Speed delivered over 31.1 million doses across the country, only 12.3 million people have received the vaccine.
The Wall Street Journal reported that Biden will extend a pause on interest and principal payments for federal student loans until the end of September, keeping in place restrictions on evictions and foreclosures, and mandating the wearing of face masks on federal property and for interstate travel on airlines, trains and transit systems.
Andrew Smith, chief investment strategist of Dallas-based Delos Capital Advisors, expects the cyclical rotation into sectors like energy XLE, 0.44%, financials XLF, -0.53%, and materials XLB, 0.38% to continue, but for any gains for the market as a whole to be a “grind.”
Smith expects that to drag on “until the vaccine rollout becomes more widespread and we get more clarity on the earnings recovery,” he said in an interview, but added, “it could be months before that happens.”
Meanwhile, Smith thinks inflation could take investors by surprise, possibly becoming a drag on consumer spending as soon as the second quarter.
Investors are also parsing earnings reports from the likes of Netflix as well as those from Morgan Stanley, and Dow components UnitedHealth and P&G.