By Anna Hirtenstein and Alexander Osipovich
U.S. stocks climbed as Janet Yellen endorsed higher coronavirus
relief spending and some of the country's biggest banks beat
expectations for fourth-quarter earnings.
The Dow Jones Industrial Average rose 116.26 points, or 0.4%, to
30930.52. The S&P 500 advanced 30.66 points, or 0.8%, to
3798.91. The technology-heavy Nasdaq Composite jumped 198.68
points, or 1.5%, to 13197.18.
The gains marked an upbeat start to the week, following a long
holiday weekend with markets closed on Monday, after all three
indexes fell last week. The Dow, S&P 500 and Nasdaq are all
within 1% of record highs set earlier this month.
Ms. Yellen backed major fiscal stimulus to help workers and
businesses battered by the coronavirus pandemic as she testified
before the Senate Finance Committee, which will vote on her
nomination for Treasury secretary. In prepared remarks, she said
the U.S. risks a longer, more painful recession unless Congress
approves more aid, and encouraged lawmakers to "act big" to shore
up the recovery.
President-elect Joe Biden unveiled a plan for a $1.9 trillion
fiscal stimulus package last week, which would include direct
payments of $1,400 to most households and spending on vaccine
distribution. Passing it through Congress is one of the first major
tests for the incoming leader, who will be inaugurated
Ms. Yellen will be the "holder of the keys of unprecedented
spending," said Ludovic Subran, chief economist at Allianz. "It
will be reassuring for people to see she's very pragmatic in the
way that she addresses the crisis, similarly to how she was in her
role at the Fed."
The S&P 500 is up nearly 13% since Nov. 3, putting the index
on track for its best performance from Election Day to Inauguration
Day since Herbert Hoover's election victory in 1928, and its
best-ever performance during that stretch for a Democrat. Upbeat
news on the effectiveness of new Covid-19 vaccines played a major
role in those gains.
Earnings season kicked into high gear. Bank of America shares
slipped 24 cents, or 0.7%, to $32.77 after the bank reported a 22%
profit decline in the fourth quarter, but still came ahead of
Goldman Sachs slumped $6.81, or 2.3%, to $294.20 despite
releasing earnings that significantly beat expectations.
Major banks' earnings suggest they are "seeing the economy
stabilize; their worst-case scenarios haven't been met," said
Shaniel Ramjee, a multiasset fund manager at Pictet Asset
Management. "Even if the virus is still with us, banks are seeing
an uplift in the economy."
Investors are keeping a close eye on the rollout of Covid-19
vaccines, which has hit early snags as the U.S. has struggled to
deliver limited supplies of the inoculations to the most vulnerable
segments of the population. A vast swath of the country must be
vaccinated before the economy can return to pre-pandemic levels of
activity, particularly in the travel and leisure sectors.
"That normalization date keeps getting pushed out with the
various logistical challenges of rolling out the vaccines," said
Ben Kirby, co-head of investments at Thornburg Investment
Eight of the S&P 500's 11 sectors were up on Tuesday. Energy
stocks posted the biggest gains, boosted by rising oil prices.
Futures on Brent crude, the global oil benchmark, gained 2.1% to
settle at $55.90 a barrel on hopes that stimulus and vaccinations
will boost energy demand.
General Motors stock rallied $4.87, or 9.7%, to a new high of
$54.84 after its driverless-car startup, Cruise, said it had
entered into a partnership with Microsoft. The technology giant is
also joining a group of companies set to invest more than $2
billion in Cruise.
Shares of big tech and social-media companies climbed, after
faltering last week. Facebook shares rose $9.74, or 3.9%, to
$261.10. Twitter added 75 cents, or 1.7%, to $45.93.
"There's a 'buy the dip' mentality," said Sebastien Galy, a
macro strategist at Nordea Asset Management. "Cynicism doesn't last
long. It shows that equities can still rally significantly
In other corporate news, shares of laser maker Coherent surged
$45.06, or 30%, to $197.01 after it agreed to be acquired by
Lumentum, a computer components firm. Lumentum stock fell $11.72,
or 11%, to $94.60.
Overseas, the pan-continental Stoxx Europe 600 declined 0.2%.
Jeep-owner Stellantis, the recently combined business of Fiat
Chrysler and PSA Group, gained 2.6%, extending Monday's pop after
it made its debut on French and Italian exchanges.
In Asia, most major benchmarks rose. Hong Kong's Hang Seng Index
advanced 2.7% and Japan's Nikkei 225 index added 1.4%, led by
shares of tech and car companies. The Shanghai Composite Index
In U.S. bond markets, the yield on the benchmark 10-year
Treasury note slipped to 1.092% from 1.097% Friday, with the market
closed Monday for Martin Luther King Jr. Day.
Write to Anna Hirtenstein at firstname.lastname@example.org and
Alexander Osipovich at email@example.com
(END) Dow Jones Newswires
January 19, 2021 16:46 ET (21:46 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.