Written by DAMIAN J. TROISE and ALEX VEIGA AP Business Writers, STAN CHOE
Wall Street kicked off a holiday-shortened week with broad gains for stocks Tuesday, as the market recovered most of its losses from last week.
The S&P 500 gained 0.8%, pulling to within 1% of its record high set earlier this month. About 60% of the companies in the benchmark index rose.
Technology, communication services and health care stocks accounted for much of the rally, though energy sector companies notched the biggest gain. Treasury yields rose.
The gains marked a reversal from last week, when stocks ran out of steam after a strong start to the year. Markets have been rising on enthusiasm about a coming economic recovery as COVID-19 vaccines roll out and Washington gets set to try for another massive round of stimulus for the economy.
Janet Yellen, President-elect Joe Biden’s nominee to be Treasury Secretary, is calling on Congress to do more to boost the economy. In testimony prepared for her confirmation hearing on Tuesday, she said that with interest rates near their record lows, “the smartest thing we can do is act big” to avoid an even worse downturn in the near term and scarring for the economy in the long term.
Biden last week released details of a $1.9 trillion plan to bolster the economy, which would include $1,400 cash payments for most Americans.
Democrats are also pushing for an accelerated rollout of COVID-19 vaccines, a higher minimum wage for workers and enhanced benefits for laid-off workers. The hope is that such stimulus can carry the economy until later this year, when more widespread vaccinations get life returning to some semblance of normal.
“If most of this is implemented, it does suggest significant pickup in economic growth as we head through to the fourth quarter of this year,” said David Kelly, chief global strategist at JPMorgan Funds.
The S&P 500 rose 30.66 points to 3,798.91. The Dow Jones Industrial Average added 116.26 points, or 0.4%, to 30,930.52. The Nasdaq composite gained 198.68 points, or 1.5%, to 13,197.18.
Traders continued to bid up shares in smaller companies, a sign of confidence in the prospects for future economic growth. The Russell 2000 index picked up 27.94 points, or 1.3%, to 2,151.14.
U.S. markets were closed Monday in observance of Martin Luther King Day.
The case for more economic stimulus from the government has been rising by the day. Dismal reports have piled up showing how the worsening pandemic has more workers applying for jobless benefits and shoppers feeling less confident.
Tuesday’s Senate Finance Committee hearing with Yellen is one of several that the Senate will be holding as the incoming Biden administration tries to get its top Cabinet officials in office quickly. Biden is set to take the oath of office on Wednesday, ending President Donald Trump’s four-year term.
Besides stocks, the optimism about an eventual acceleration for the economy and another round of stimulus have also helped push Treasury yields up sharply recently.
The yield on the 10-year Treasury climbed to 1.10% from 1.08% late Friday. Higher rates could eventually add pressure on stocks, underscoring more how expensive stocks have become relative to the profits that companies are producing.
But some areas of the stock market could benefit, including banks. Higher rates and a healthier economy would allow them to earn bigger profits from making loans.
Bank of America slipped 0.7% after reporting a weaker profit for the last three months of 2020 than a year earlier, though its results were still above analysts’ expectations. The bank also said expectations for a healing economy mean it doesn’t need to hold onto as much in reserves to cover for potentially bad loans.
Goldman Sachs, State Street and Halliburton also reported stronger results for the end of 2020 than analysts expected as earnings reporting season picks up pace. Wall Street is expecting a relatively weak showing across the S&P 500 this time around, with another sharp drop in earnings per share.
But analysts expect growth to rebound powerfully through 2021.
General Motors jumped 9.7% for the biggest gain in the S&P 500 after saying its self-driving car company, Cruise, will work with Microsoft to develop autonomous, all-electric vehicles. GM, Microsoft, Honda and other investors will also pump $2 billion into Cruise, valuing it at $30 billion. GM bought Cruise in 2016. Microsoft shares rose 1.8%.
Western Union rose 2% after it said it will begin offering money transfer and other services at more than 4,700 Walmart stores, beginning in the spring. Walmart slipped 0.9%.
Netflix surged in after-hours trading after the video streaming giant reported results that blew past Wall Street’s forecasts.
NOV slid 5.9% for one of the biggest losses in the S&P 500 after saying it expects to report weaker revenue and results for the end of 2020 than it had earlier forecast. The energy company said the resurgence of COVID-19 infections pushed customers to slow their orders.