Wall Street advanced on Monday, with all three major U.S. indexes reaching record closing highs as long-awaited pandemic relief and Brexit trade deals fuelled investors’ risk appetite.
U.S. equities followed their European counterparts with a broad rally, and communications services and consumer discretionary stocks led the charge.
But crude oil prices slumped as weak demand and a potential increase in production offset the effects of the U.S. fiscal aid package signed late on Sunday by President Donald Trump.
He reversed course by signing a US$2.3-trillion stimulus and spending bill into law, heading off a potential government shutdown and setting the stage for congressional Democrats to push for more robust direct payments of US$2,000 to millions of Americans.
“Finally something has gotten done and it’s given the market reason to be optimistic,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Conn. “We’ve still got dark days ahead with COVID, but with the stimulus package and Brexit deal, it gives us reason to focus on the positive.”
Britain reached a trade agreement with the European Union on Thursday, days before leaving one of the world’s largest trading blocs, and urged businesses to prepare for disruptions resulting from the completion of Brexit.
The Dow Jones Industrial Average rose 204.1 points, or 0.68 per cent, to 30,403.97; the S&P 500 gained 32.3 points, or 0.87 per cent, to 3,735.36; and the Nasdaq Composite added 94.69 points, or 0.74 per cent, to 12,899.42.
European shares had their strongest close in 10 months and German shares hit an all-time high on the U.S. stimulus and Brexit trade deals.
The ongoing rollout of coronavirus vaccines also buoyed sentiment, with Pfizer Inc. announcing it expects to complete distribution of 200 million doses in Europe by September.
The pan-European STOXX 600 index rose 0.66 per cent and MSCI’s gauge of stocks across the globe gained 0.55 per cent.
Markets in Canada and Britain were closed on Monday in observance of the Boxing Day holiday.
Stocks battered by coronavirus lockdowns, such as airlines and cruise lines, advanced on Wall Street. The S&P 1500 airlines index gained as carriers are set to receive US$15-billion in additional payroll assistance under the new government aid.
Cruise operators Royal Caribbean Cruises Ltd., Carnival Corp. and Norwegian Cruise Line Holdings Ltd. each rose by at least 3 per cent.
On a sector basis, gains were led by communication services, consumer discretionary and tech as each climbed more than 1 per cent.
After a sharp recovery from a coronavirus crash in March, the S&P 500 is on track to rise more than 15 per cent this year on the back of a loose monetary policy and a COVID-19 vaccine program that has raised hopes the economic environment will improve.
Despite the generally favourable conditions for equities, worries over a resurgence in coronavirus cases, upcoming U.S. Senate runoffs in Georgia and stretched valuations could become headwinds. The forward price-to-earnings ratio of the S&P is currently about 22.2, well above its long-term average of 15.3.
Trading volumes are expected to be thin in the final week of the year that has historically been a seasonally strong period for equities.
In other financial markets, U.S. Treasury yields rose early in the session but gave up those gains by the end of the session as the risk-on rally lost some steam.
Benchmark 10-year notes last rose 1/32 in price to yield 0.9264 per cent, from 0.93 per cent late on Thursday.
U.S. crude dropped 1.26 per cent to settle at US$47.62 a barrel. Brent settled at US$50.86 a barrel, down 0.84 per cent on the day.
Gold reversed its early gains as the U.S. dollar recovered its losses amid the stocks rally. Spot gold dropped 0.2 per cent to US$1,872.87 an ounce.
Bitcoin climbed 2.74 per cent to US$26,695 but was below a record high US$28,378 reached on Sunday.
Reuters