Dow hits 30,000 at start of transition to Biden, Yellen prospect as Treasury secretary

The Dow Jones Industrial Average hit a record 30,000 on Tuesday, a symbolically significant benchmark in a year that has been lashed by the economic fallout from the coronavirus pandemic and a deadly electoral cycle.

The Dow Jones rose just over 400 points on Tuesday morning, breaking an intraday high. The S&P 500 and the Nasdaq Composite both climbed just under 1%.

The Wall Street rally came a day after the Trump administration agreed to begin the process of transitioning to President-elect Joe Biden, giving him access to millions of dollars in federal funds and other resources to begin his transition to power.

The transition process had been stalled for weeks as President Donald Trump’s team waged a fierce legal battle across the country to challenge the results, leaving Biden out of the loop on the Covid-19 vaccine and other key issues .

Markets hit record highs this month after Moderna and Pfizer both announced promising vaccine candidates in the fight against Covid-19.

Wall Street was also optimistic after former Federal Reserve Chairman Janet Yellen became President-elect Joe Biden’s likely choice for Treasury secretary.

As Yellen faces a huge challenge to pull the country out of the pandemic amid millions of lost jobs and record levels of debt, markets have exploded under her tenure at the Fed and she has decades of experience. macroeconomic. During his four-year tenure at the Fed, Yellen supported the economic recovery with accommodative monetary policy and support for low interest rates.

In July, Yellen urged lawmakers to renew emergency benefits created at the start of the pandemic, telling members of the Special House subcommittee on the coronavirus crisis that it would be “a disaster” not to extend them. $ 600 extra weekly unemployment insurance for millions of unemployed Americans.

The added benefits are a lifeline for those who are unemployed, Yellen said, adding that, on a broader spectrum, “we need the expenses these unemployed people can afford.”

This market benchmark has been a long time coming. The Dow Jones hit a few percentage points after hitting 30,000 in January, a window of opportunity that appeared to close as the Covid-19 pandemic led to widespread closures, job losses and a drop in domestic product gross. But aggressive Federal Reserve rate cuts and optimism from the tech sector had supported stocks, and the central bank’s interventions were accompanied by soaring valuations of large tech firms that dominate the market. more and more benchmarks, many of which have benefited from and dramatic changes in consumer behavior brought on by the pandemic.

“Anytime you have an accommodating Fed, low interest rates, a more accommodating environment, the outlook is good for stocks,” said David Frisch, chairman of Frisch Financial Group.

“Because of what has happened since March, a lot more of us are working from home, we do things virtually, we distribute content online and we order things to happen to our homes,” Sameer Samana said. , Senior Global Market Strategist at Wells Fargo Investment Institute. In particular, Apple, Microsoft, and Salesforce have helped propel the Dow up.

There is also an emotional dynamic that kicks in when the markets move closer to symbolic benchmarks. “There’s usually a bit of psychology and market sentiment attached to some of these big levels,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management.

Analysts say investors should be wary of overexuberance, given that it could still be months before a vaccine is readily available to most Americans.

“Even with the promise of an effective vaccine against Covid-19, we must now take a sober look at the damage this virus has caused to the economy,” said James McDonald, CEO of Hercules Investments, adding that a “return to normal” would not be possible. don’t come right away.

“An overnight recovery is impossible, let alone overnight growth that exceeds pre-Covid-19 levels,” he said.