After a reluctant session, Wall Street finished with fresh records on Friday. Investors expect the forthcoming administration of Biden to have a large fiscal stimulus plan and continue to flood in amid strong stock market valuations and the return of the Covid-19 outbreak. The Dow Jones index gained +0.18% to 31,097 points at the end, while the large S&P 500 index gained 0.55% to 3,824 points, and the Nasdaq Composite Index, which is abundant in electronics and biotech stocks, advanced 1.03% to 13,201 points.
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The three indexes posted gains of 1.6 percent, 1.8 percent, and 2.4 percent respectively in the first week of 2021.
On Friday, seven of the 11 industry indices in the S&P 500 rose, including consumer durable products which rose 1.8%; real estate surged up 1%; infrastructure took a bit traction at 0.8%) while the technology sector leaped by 0.7 percent.
The hope of extra financial support for Wall Street, combined with the continuity of ultra-accommodative monetary policy by the Fed, outweighs the factors of concern like valuations considered unsustainable on some assets, escalation of the Covid-19 pandemic, and signs of a weakening recovery in December, especially in the U.S. labor market.
For starters, last month, the U.S. economy, which had recovered just over half of the 20 million jobs lost in March-April, started destroying jobs again. In December, 140,000 workers were lost, while the consensus was for the moderate formation of 50,000 jobs.
However, for November and October combined, job growth estimates were revised up by 135,000, and the unemployment rate stabilized at 6.7 percent. Hourly incomes have increased higher than expected, compared to -0.3 percent and 4.4 percent in November, rising by 0.8 percent on a month-on-month basis and by 5.1 percent over one year.
On the other hand, Bank of America’s influential head of marketing, Michael Hartnett, among others, issued a note to clients on Friday advising them to sell, taking advantage of the stream of encouraging reports about the coronavirus vaccine.
