The S&P 500 gained over 1%, while the Nasdaq jumped 2.5%
Stocks on Thursday and the Dow and S&P 500 each set record highs after President Joe Biden signed into law another massive pandemic relief package. Technology shares bounce back, and Treasury yields steadied.
The S&P 500 gained over 1% to hit both a record intraday and closing high. The Nasdaq outperformed as tech stocks resurged, and the index jumped 2.5%. The risk rally extended to Bitcoin, which rallied to over $57,000 and ended on the record high it hit late last month. The Dow advanced 0.6%, or 188 points, and also reached a closing high.
Over the past several weeks, the technology-heavy Nasdaq and Dow have diverged in performance as traders increasingly piled into value and cyclical shares viewed as most closely tied to a strong economic rebound. The cyclical energy and financials sectors have also been leading gains in the S&P 500, extending a run of outperformance against tech and growth shares. Treasury yields steadied across the curve, pulling back following a milder than expected print on consumer price inflation earlier this week.
The market moves on Thursday came after Biden signed into law a $1.9 trillion Covid relief package, which includes provisions such as $1,400 stimulus checks to most Americans, $300 per week in augmented unemployment benefits through early September, and $350 billion in state, local and tribal government aid. The bill cleared both the U.S. House of Representatives and Senate in the past week on partisan lines.
The passage of the bill — exceeded in dollar amount only by the $2.2 trillion CARES Act passed at the start of the pandemic last year — will reverberate quickly through the economy, many experts have said. The bill also comes one year after the World Health Organization’s (WHO’s) formal designation of the coronavirus outbreak as a pandemic, which took place March 11, 2020.
The most immediate impact in the macroeconomic data will be in retail sales numbers, where some of the $410 billion in direct payments will appear in both the March and — especially — April reports, Ian Shepherdson of Pantheon Macroeconomics wrote in a note Wednesday.
We also expect to see a rapid response — though not quite as quick as in the retail sales data — from state and local governments, which will use much of their $350 billion in direct support from the federal government, alongside $130 billion for schools, to re-hire some of the 1.3 million people let go from the sector since the pandemic started, he said.
The $1,400 stimulus checks will likely also have a direct impact on equity markets. Earlier this week, Goldman Sachs equity strategists raised their forecast for household equity demand this year to $350 billion from $100 billion, reflecting “faster economic growth and higher interest rates than we had assumed previously, additional stimulus payments to individuals, and increased retail activity in early 2021,” according to the firm.
Others echoed similar sentiments.
Given that the most recent reading of the personal savings rate is a healthy 20.5%, our expectation is that a portion of the stimulus money makes its way into equities, Cliff Hodge, chief investment officer for Cornerstone Wealth, said in an email on Wednesday. The last time around, flows went into more speculative areas of the market, including SPAC’s, Reddit stocks, and high-growth momentum, so it wouldn’t surprise us to see something similar.