Shares rose Friday after Treasury Secretary Janet Yellen said a large Covid bailout is needed for a full US recovery
The Dow Jones Industrial Average rose 55 points in the Open, while the S&P 500 gained 0.25%. The Nasdaq Composite outperformed, up 0.5%.
Cyclical stocks started on strong foundations, with industrial, financial and energy sectors up 1%, 0.9% and 0.85%, respectively. Utility and communications services stocks were some of the biggest laggards.
Yellen told CNBC on Thursday after the bell that further stimulus was needed, although some economic data suggests a recovery was already underway. She added that a $ 1.9 trillion economic agreement could help the US get back to full employment in a year.
“We think it’s very important to have a big package [that] addresses the pain this has caused – 15 million Americans are behind on their rent, 24 million adults and 12 million children who don’t have enough to eat, small businesses fail, “said Yellen Sara Eisen of CNBC during a” Closing Bell “interviews.
“I think the price of too little is much higher than the price of something big. We believe the benefits will far outweigh the costs in the long run,” she added.
Janet Yellen, candidate for US President-elect Joe Biden as Treasury Secretary, speaks as Biden announces nominees and candidates for his policy team on December 1, 2020 at his interim headquarters in Wilmington, Delaware, United States.
Leah Millis | Reuters
The record rally in the equity markets stalled a little this week as fears of rising interest rates and higher inflation crept in. The S&P 500 fell for a third straight day on Thursday after jobless claims were worse than expected and forecasts were weak from Walmart.
Friday’s gains were not enough to push the broader S&P 500 higher than the week, with the index falling 0.3% over the past week. The Dow Jones Industrial Average did better with a slight gain of 0.12%. The Nasdaq Composite is down 1.2% since trading closed last Friday.
Some investors said pessimism about a rate hike and the potential for inflation had kept Wall Street in check for the past few sessions. The 10-year government bond yield rose to its highest level in nearly a year this week, from just 1.30% on Friday.
However, Yellen said she doesn’t think inflation should be the top concern.
“Inflation has been very low for over a decade, and you know that is a risk, but it is a risk that the Federal Reserve and others have tools to deal with,” she said. “The greater risk is scaring people as this pandemic is permanently affecting their lives and livelihoods for life.”
Many on Wall Street agree with Yellen that a huge incentive is needed and that a trillion dollar package, along with a smooth economic reopening this year, will keep the market rally continuing.
“Much of our deliberations for additional profit from here rests on an ongoing belief that the key drivers that helped bring the market up to date remain intact,” said Scott Wren, Wells Fargo’s leading global market strategist. in a note. One of the drivers is “an additional incentive from Congress that will help bridge the gap between now and the spread of vaccines”.
The House of Representatives will attempt to pass a $ 1.9 trillion coronavirus relief plan before the end of February, spokeswoman Nancy Pelosi said Thursday. Democratic Congress leaders could try to pass a package without a Republican vote.
Applied Materials, which is used to make the devices used to make semiconductors, issued a better-than-expected forecast for the second quarter after Bell Thursday. The stock gained 5% on the Friday before trading. Other chip-related stocks also rose, including Lam Research, AMD, and Nvidia.
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