A mob stormed the U.S. Capitol on Wednesday, but investors showed little reaction — lifting the Dow Jones Industrial Average to a record close and showing little appetite for traditional safe-haven assets despite violent scenes that temporarily interrupted the ratification of President-elect Joe Biden’s Electoral College victory.
That’s because the invasion of the Capitol did nothing to change expectations around the near-term political and economic outlook.
Instead, the driving force behind the session’s stock-market gains and other financial-market moves appeared to be optimism over the prospect for another, larger round of aid spending following a Democratic sweep of a pair of runoff elections in Georgia that will give the party control of the Senate as President-elect Joe Biden prepares to take office on Jan. 20. Democrats retained control of the House in the Nov. 3 elections.
“No matter the political consequences of today’s takeover of the Capitol, Wall Street continues to be encouraged by the economic-enhancement possibilities of a Democratic ‘trifecta,’” Sam Stovall, chief investment strategist of CFRA, told MarketWatch in an email after Wednesday’s market close.
Investors have also remained upbeat about the potential for vaccine rollouts to allow a wider economic reopening, despite snags in distribution and worries about a more rapid spread of COVID-19 as a result of new variants.
Stocks were in rally mode before the onset of the violence.
While stocks did pare gains, they finished the session solidly higher. The Dow Jones Industrial Average DJIA, +1.44% rose 437.80 points, or 1.4%, to close at a record 30,829.40 after earlier breaching the 31,000 threshold for the first time. The S&P 500 SPX, +0.57% advanced 0.6% to close at 3,748.14, just 0.2% away from its all-time high finish, while the Nasdaq Composite COMP, -0.61% lost ground to end the day with a loss of 0.6%.
Treasurys, which tend to serve as a haven during periods of unrest and uncertainty, instead saw prices fall, driving up yields. The 10-year yield TMUBMUSD10Y, 1.041% rose 8.6 basis points to 1.041%, finishing above the 1% level for the first time in nine months.