American Dow Jones crests 30,000 points on vaccine hopes, Biden transition

American Dow Jones crests 30,000 points on vaccine hopes, Biden transition

Wednesday, November 25, 2020

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The Dow Jones Industrial Average traded above 30,000 points for the first time yesterday as investors were encouraged by the latest progress on developing novel coronavirus vaccines and news that the transition of power in the US to President-elect Joe Biden will finally begin.

Traders were also encouraged to see that Biden had selected Janet Yellen, a widely respected former Federal Reserve chair, as treasury secretary. The Dow rose more than 400 points, or 1.4 per cent, to trade just over 30,000 yesterday afternoon. The S&P 500 index, which has a far greater impact on 401(k) accounts than the Dow, rose 1.5 per cent.

The gains extend a month-long market rally driven by growing optimism that development of novel coronavirus vaccines and treatments will loosen the pandemic's stranglehold on the economy. They also mark a rapid climb for the Dow from its March 23 low of just under 18,600 during the worst of its early pandemic nosedive.

“We are one step closer to moving past the election uncertainty,” said Lindsey Bell, chief investment strategist at Ally Invest. “People are still optimistic about what 2021 has to bring, from an economic perspective and an earnings perspective.”

The Dow was up 444 points to 30,037 as of 3:03 pm Eastern time. Boeing, which brings a heavyweight to the Dow, rose three per cent. The technology-heavy Nasdaq composite was up 1.2 per cent.

Traders are favouring stocks that stand to gain the most from a gradual reopening of the economy, such as banks and industrial companies. Overseas markets also rose. Treasury yields and oil prices were headed higher.

“There's some relief that Biden is choosing moderates to fill out the Cabinet,” said Barry Bannister, head of institutional equity strategy at Stifel. Bannister also said the encouraging vaccine news continues to give hope that there is an end in sight to the pandemic.

On Monday, the head of the federal General Services Administration acknowledged that Biden is the apparent winner of this month's presidential election. That allows the incoming president to coordinate with federal agencies on plans for taking over on January 20, despite ongoing efforts by President Donald Trump to overturn the election.

Word that Biden has chosen Yellen as treasury secretary also added to investors' confidence. Widely admired in the financial world, Yellen would be the first woman to lead the department in a line stretching back to Alexander Hamilton in 1789, taking on a pivotal role to help shape policies at a perilous time.

“She's also pretty pro-fiscal stimulus and she's able to effectively work with people across the aisle,” Bell said. “She showed that in her time at the Fed.”

Stocks have been pushing higher this month, driving the S&P 500 up by more than 10 per cent, as investors have grown more hopeful that the development of novel coronavirus vaccines and treatments will help pave the way for the economy to recover next year.

The latest vaccine developments are also tempering lingering concerns over rising virus cases in the US, as well as in Asia and other parts of the world, and new government restrictions on businesses aimed at limiting the spread.

On Monday, drug maker AstraZeneca reported surprisingly good results from ongoing vaccine studies. It said its potential vaccine, which is being developed with University of Oxford, was up to 90 per cent effective. Unlike rival candidates, AstraZeneca's doesn't have to be stored at ultra-cold temperatures, making it easier to distribute.

Last week, Pfizer and Moderna both reported study results showing their vaccines were almost 95 per cent effective. And, over the weekend, Regeneron Pharmaceuticals received US Government approval for emergency use of its COVID-19 treatment. The drug, which Trump received when he was sickened last month, is meant to try to prevent hospitalisation and worsening of the disease in patients with mild-to-moderate symptoms.


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