S&P and Dow Surge After Biden Signs Stimulus
President Joe Biden’s speech that aired during prime time Thursday evening, just hours after he signed his stimulus package into law, represented a beacon of hope for Americans that pandemic restrictions will taper off by spring and Americans can safely celebrate the Fourth of July with “small gatherings.”
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But the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite were a few steps ahead of the speech. All three indices soared Thursday afternoon upon news of President Biden signing the long-awaited $1.9 trillion stimulus bill. Bitcoin also approached record highs, rallying to over $57,000, Yahoo! Finance reports.
The Dow climbed mid-afternoon, reaching a high of $32,658 midday and closing at $32,485, which was 189 points over the previous day’s close.
The Nasdaq composite gained 2.52% percent, closing just short of $13,400 as tech stocks rebounded. The S&P 500 gained just over 1%, closing at $3,939. Treasury yields steadied, which could also have affected the market rebound, as high bond yields have driven the major markets down in recent days.
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Experts predict the $1,400 stimulus checks could have a great impact on equity markets, according to Yahoo! Finance. Strategists and Goldman Sachs suggested that some of the stimulus money could be invested in the stock market, Yahoo! Finance reports.
“We expect households will be the largest source of equity demand this year,” Goldman’s chief U.S. equity strategist David Kostin told Yahoo! Finance. “We raise our household net equity demand forecast to $350 billion from $100 billion, which reflects faster economic growth and higher interest rates than we had assumed previously, additional stimulus payments to individuals, and increased retail activity in early 2021.”
With retail investors looking at an infusion of capital, one might expect meme stocks and other fan favorite stocks like Tesla, fueled by consumers’ passion for the company, to rise.
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In addition, Americans have changed their savings habits during the pandemic, with 22% of Americans saying they socked away at least $1,000 during the pandemic, according to a survey done by MassMutual in July 2020. Additionally, the survey revealed that 47% spent less during the summer of 2020 than they did in the summer of 2019.
Personal savings compared to disposable income rose to 20.5% in January 2021, according to a study by the Bureau of Economic Analysis.
“Our expectation is that a portion of the stimulus money makes its way into equities,” Cliff Hodge, chief investment officer for Cornerstone Wealth, told Forbes. “The last time around, flows went into more speculative areas of the market, including SPACs, Reddit stocks, and high-growth momentum, so it wouldn’t surprise us to see something similar.”
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