The Dow Jones Industrial Average hit a record high of 30,000 on Tuesday, a symbolically significant benchmark in a year that has been whipsawed by the economic fallout of the coronavirus pandemic and a bruising election cycle.
The Dow rose by over 450 points to close the day at 30,045, a record high for the blue-chip index. The S&P 500 and the Nasdaq Composite both climbed by around 1.5 percent.
Wall Street's rally came a day after the Trump administration agreed to start the transition process 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 sputtering legal battle across the country to contest the results, leaving Biden out of the loop on the Covid-19 vaccine and other key issues.
Trump, who is facing mounting pressure to publicly concede, cheered the stock market rally Tuesday, telling reporters in the White House briefing room he wanted to "congratulate the people of our country because there are no people like you," and called the Dow's milestone a "sacred number."
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 Chair Janet Yellen emerged as President-elect Joe Biden's likely pick for treasury secretary.
While Yellen faces a huge challenge to lead the country out of the pandemic amid millions of lost jobs and record debt levels, markets soared under her tenure at the Fed and she has decades of macroeconomic experience. During her four-year tenure at the Fed, Yellen supported the economic recovery through accommodative monetary policy and support for low interest rates.
In July, Yellen urged lawmakers to renew the emergency benefits created in the early days of the pandemic, telling members of the House Select Subcommittee on the Coronavirus Crisis that it would be "a catastrophe" not to extend the $600 in additional weekly unemployment insurance for millions of out-of-work Americans.
The additional benefits are a lifeline for those who are out of work, Yellen said, adding that, on a broader spectrum, “We need the spending that those unemployed workers can do."
This market benchmark has been a long time coming. The Dow came within a few percentage points of hitting 30,000 back in January, a window of opportunity that seemed to slam shut when the Covid-19 pandemic led to widespread shutdowns, job losses and plunging gross domestic product. But aggressive rate cuts by the Federal Reserve and tech sector optimism had buoyed stocks, and the central bank’s interventions were accompanied by a run-up in the valuations of the big tech companies that increasingly dominate the benchmark indices, many of which benefitted from the abrupt and dramatic changes in consumer behavior triggered by the pandemic.
“Anytime you have an accommodating Fed, low interest rates, more of an accommodative environment, the prospects are good for stocks,” said David Frisch, president of Frisch Financial Group.
“Because of what’s transpired since March, a lot more of us are working from home, we’re doing things virtually, we’re streaming content online and ordering things to come to our homes,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute. In particular, Apple, Microsoft and Salesforce have helped propel the Dow higher.
There also is an emotional dynamic that comes into play when markets near symbolic benchmarks. “There tends to be a bit of psychology and a market sentiment attached to some of those big levels,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management.
Analysts say investors should be wary of over-exuberance, given that it still could be months before a vaccine is readily available for most Americans.
“Even with the promise of an effective Covid-19 vaccine, we now have to take a sober look at the damage this virus has caused the economy,” said James McDonald, CEO of Hercules Investments, adding that a “return to normalcy” wouldn’t come right away.
“An overnight recovery is impossible, let alone overnight growth that exceeds pre-Covid-19 levels,” he said.