Dow Rallies on New Deal, S&P500 and Nasdaq Close at Records

25 Jun 2021 · 3rd Party Analysis

Dow Rallies on New Deal, S&P500 and Nasdaq Close at Records

WRITTEN BY ThorFX

In Summary

  • US stocks rally after President Biden announces an agreement on a $1tn infrastructure package
  • S&P500, Nasdaq Composite close at record highs, Dow surges over 300 points

Stocks on Wall Street gained new momentum Thursday propelled by the Biden administration’s announcement that a bipartisan group of 10 Senators has agreed on a roughly $1tn infrastructure plan.

Market participants cheered the big milestone for the US economy and pushed benchmark indexes to new records. The S&P500 added 24.65 points, or 0.58%, to close at a record of 4,266.49. The Nasdaq Composite gained 97.98 points, or 0.69%, closing at a new all-time high of 14,369.71. The tech-heavy index logged its third straight day of gains. The Dow Jones Industrial Average rallied 322.58 points or 0.95%, to finish the day at 34,196.82.

Investors received the good news of reaching a long-sought agreement on infrastructure and piled into stocks from real-economy sectors to technology, driving a broad-based rally that lifted the entire market.

The new leg up in stock valuations reflected investors’ easing concerns over high inflation, higher interest rates, and tighter monetary policy. Market participants now seem comfortable with the notion that the expected changes in monetary policy would not dent the accelerating growth of the US economy. The markets appear able to digest the news that the Federal Reserve aims to raise rates by 2023. Stocks have been rallying this week, recovering from last week’s sell-off prompted by the Fed’s intention to lift rates, while initiating discussions over tapering.

Moreover, in another sign that strong growth is backing the lofty stock market, the latest data from the Labor Department showed that 411,000 people applied for unemployment benefits. The weekly jobless claims are slightly less than the prior week’s 418,000.

Microsoft Goes Higher

In individual stocks, Tesla shares rallied $23.25, or 3.54%, to $679.82 boosted by investors’ returning confidence to growth stocks. The revival in stocks added to the ongoing market optimism that has been pushing main indexes to new records in recent months. Shares in Microsoft moved higher by $1.42, or 0.53%, to $266.69 after the software giant unveiled its new Windows 11. The overhaul of Microsoft’s Windows operating system includes only limited changes to its visual design. It aims, however, to feature an app store that would collaborate with Amazon.

Overseas, the pan-continental Europe Stoxx 600 rose 0.87%, while main European indexes rallied individually. The French CAC40 advanced 1.22%, the German DAX gained 0.86%, and the UK’s FTSE100 moved up by 0.51%.

The Bank of England underscored Thursday the UK will “experience a temporary period of strong” growth that would push the inflation rate above BoE’s target. Similar to the European Central Bank and the US Federal Reserve, the Bank of England downplayed inflation expectations saying price increases could exceed 3% in the coming months but the trend is expected to be “transitory”.

On the cryptocurrency front, Bitcoin remained pinned below $35,000 while crypto enthusiasts struggle to create another buying wave that would propel the digital currency upwards. Earlier in the week, Chinese

officials cracked down on mining operations in the Sichuan region, causing the price of Bitcoin to drop below $30,000.

In a recent bit of good news for crypto, Andreessen Horowitz, a venture capital firm that has been an early backer in Facebook, raised $2.2bn for its third fund focused on investing in cryptocurrencies. The funding round exceeded the initial target of $800mn to $1bn, signaling heightened demand from institutional investors.

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