US stocks ended a tumultuous year with the Dow Jones Industrial Average and the S&P 500 at records, as the three major US equity indexes notched solid-to-spectacular yearly gains despite an economy upended by the COVID-19 pandemic and as investors looked to a post-pandemic world.
In a year that marked the end of the longest bull market on record as pandemic-induced government lockdowns battered the global economy, equities stormed back, with the S&P 500 climbing more than 66 percent from its March 23 low, resulting in the shortest bear market in history.
The gains — which sent the Dow and the S&P 500 to record highs to close out the year and the NASDAQ Composite to a record earlier this week — were fueled in part by massive fiscal and monetary stimulus put in place to buttress a US economy reeling from the pandemic fallout, as well as progress on vaccines.
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For the year, the S&P 500 gained about 16 percent, the Dow about 7 percent and the NASDAQ more than 43 percent, which marked the biggest yearly gain for the tech-heavy index since 2009.
“For broad indexes, this is a bullish year, despite the craziness in the real world,” Harvest Volatility Management research and trading head Mike Zigmont said.
“It feels very much to me like investors have decided the world has changed forever,” Zigmont added. “The coronavirus pandemic was the catalyst and now investors have decided who the winners are and who the losers are, and are moving forward.”
Still, data on Thursday was a reminder that the economy still has a lengthy recovery ahead as weekly initial jobless claims, while declining for a second consecutive week to 787,000, remained well above the peak of the 2008-2009 financial crisis.
Tech and consumer discretionary were the best performing sectors on the year, while energy, a laggard for the past decade, was once again the weakest of the 11 major S&P sectors on the year en route to its worst yearly performance ever.
Mega-cap companies such as Amazon and Apple helped lift the broad S&P 500 and the NASDAQ, as well as gains in names that have benefited from the “stay at home” environment, such as online retailer ETSY Inc and digital payment platform PayPal.
On Thursday, the Dow rose 191.34 points, or 0.63 percent, to 30,600.9; the S&P 500 gained 24.37 points, or 0.65 percent, to 3,756.41; and the NASDAQ added 23.03 points, or 0.18 percent, to 12,893.03.
Near-term expectations of bigger stimulus checks dimmed after US Senate Majority Leader Mitch McConnell blocked a quick vote on Wednesday to back US President Donald Trump’s call to increase COVID-19 relief checks to US$2,000 from US$600.
Risk assets were able to build on the rally off the March low, adding to gains in November following a US election that investors viewed as likely to result in political gridlock.
Optimism around vaccine approvals grew, but the momentum stalled on worries over fresh fiscal stimulus and a highly infectious COVID-19 variant spreading globally.
All eyes are on two US Senate races in Georgia next week that are to determine control of the chamber and influence US president-elect Joe Biden’s ability to enact his agenda.
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