Record on Wall Street ignoring the chaos in Congress

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January 7, 2021
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January 11, 2021

Record on Wall Street ignoring the chaos in Congress

The New York Stock Exchange closed in disarray on Wednesday but the Dow Jones broke a new record, ignoring, on the surface, a tumultuous political day when rampaging pro-Trump protesters invaded the US Congress.

According to final results, the Dow Jones index finished up 1.44% to 30,829.40 points, its first record of 2021, after that of December 31.

The technology-intensive Nasdaq lost 0.61% to 12,740.79 points, suffering from a rotation of investments towards stocks in the more traditional economy. The S&P 500 advanced 0.57% to 3,748.14 points.

The New York market ended on a generally optimistic note a day which was nevertheless full of political emotions and chaos.

The Senate elections in Georgia first saw the victory of two Democrats in the Senate, which will tip Congress under the control of Joe Biden’s party.

A perspective that has its pros and cons for the market: if this will make it easier for Democrats to implement their plans for tax increases, which is not welcome for investors, they are also almost certain that a second round of financial support will help the US economy.

“With the victory of the Democrats, the chances of a bigger stimulus and an infrastructure program are almost certain, the market rode on these factors,” commented for AFP Peter Cardillo of Spartan Capital Securities.

The Dow Jones thus climbed more than 2% during the day, when the certification process for Joe Biden’s election began, raising political uncertainties, without Vice President Mike Pence being able to oppose it like the Donald Trump asked him in a heated speech in front of a crowd of supporters.

The clue then remained in the record-breaking territories shortly before the close despite chaos caused by a horde of pro-Trump protesters storming parliament in the capital.

Towards a decline?

“The market ignored what happened in Washington,” where hundreds of protesters violently entered the Capitol. But according to Peter Cardillo, the stock market could “suffer from a decline of 6% to 8%” in the coming days.

A sign that the markets have not completely closed their eyes to the scenes of insurgency, bonds, deemed to be safer than shares, have attracted investors more.

Yields on Treasury bills have suddenly climbed – that of the 10-year bond happily crossing 1% – while with the Democrats, the country’s debt is set to swell.

Gold, a safe haven if any, which had fallen in the morning to a low of the week with the start of the certification of the victory of Joe Biden, had a small bout of fever during the spectacle of the violent demonstrations , before controlling its rise.

The dollar continued its downward trend, hitting a new two-year low of 1.2330 dollars per euro at 2200 GMT.

Highly speculative bitcoin continued its run, setting a new near-daily high at $ 36,392 at 10:30 p.m. GMT.

Among the shares of the day, Tesla (+ 2.84%) at $ 755.98 closed for the first time with a capitalization of more than $ 700 billion on the stock market.

Bank stocks were on the rise, such as Wells Fargo (+ 7.08%), Bank of America (+ 6.25%) or Goldman Sachs (+ 5.40%), taking advantage of the rise in the bond market.

Yields on 10-year Treasuries climbed above 1% for the first time since March (to 1.0372% from 0.9549% the day before).

“Volatility continues into 2021,” Schwab analysts summed up.

“In the short term, there is still a threat that attempts by Trump and his many supporters to disrupt political processes they don’t like, could create more uncertainty and volatility for the markets,” warned Karl Haeling of LBBW.