Market Snapshot: Stock market rallies, Nasdaq climbs 1.5% as Yellen calls for more fiscal aid

How are stock benchmarks performing?

• The Dow Jones Industrial Average DJIA, +0.47% rose 160 points, or 0.5%, to 30,970.
• The S&P 500 SPX, +0.92% was up about 33 points, or 0.9%, at around 3,801.
• The Nasdaq Composite COMP, +1.59% advanced 193 points, or 1.5%, to about 13,190, a hair’s breadth away from its all-time closing high of 13201.98.

On Friday, stocks closed lower for the day and week, with the Dow posting a weekly loss of 0.9%, the S&P 500 and Nasdaq Composite both fell 1.5% on the week. However, the small-capitalization Russell 2000 index RUT, +1.15% posted a weekly gain of 1.5%.

What’s driving the market?

Yellen is Biden’s nominee to replace Treasury Secretary Steven Mnuchin, and during Tuesday’s confirnation hearing said more fiscal aid was needed to avoid a protracted economic recession as a result of the COVID-19 pandemic.

“Economists don’t always agree, but I think there is a consensus now: Without further action, we risk a longer, more painful recession now — and long-term scarring of the economy later,” Yellen wrote in prepared testimony. Yellen also warned that deficits would need to enter a sustainable path, at some point.

“But right now, with interest rates at historic lows, the smartest thing we can do is act big,” she said. 

Yellen also tamped down some fears about a sweeping slate of higher taxes under the Biden administration, saying it would not pursue a complete repeal of the 2017 Trump tax cuts, a concern that has bedeviled investors fretting corporations could face higher taxes.

Live blog: Yellen to champion Biden’s economic plan at confirmation hearing

See: Why dollar bears aren’t afraid of Janet Yellen

The President-elect last week unveiled a $1.9 trillion relief package, but there are fears it will be watered down by the Senate, which is split 50-50 between Republicans and Democrats, with Vice President-elect Kamala Harris set to provide the tiebreaker, noted Raffi Boyadjian, senior investment analyst at XM, in a note.

Read: Biden’s ‘rescue America’ plan is big. How its trillions could help both Wall Street and Main Street

“Yellen’s unequivocal justification for greater federal support to millions of U.S. businesses and individuals still struggling from the pandemic is seen as boosting the chances of the package passing through Congress,” Boyadjian said.

Those potential hurdles mean investors should be wary of getting too far ahead of themselves, Boyadjian and other analysts warned.

“Crucially, Senate Republicans (and not a few Democrats) seem all over the board on what elements they will or won’t support in the new economic program,” said Christopher Smart, chief global strategist at Barings Investment Institute, in a note.

“Traditional Republican concerns over budget deficits have been overwhelmed by last week’s impeachment of President Trump and what how best to unify the party. But any hints at all may move markets through the week,” he said.

Meanwhile, COVID-19 continues to spread rapidly. The U.S. added at least 142,588 new cases on Monday according to a New York Times tracker, and counted at least 1,440 deaths, although the numbers are likely underreported as staffing is reduced at weekends and on holidays.

Investors were also parsing another round of earnings, including results from Bank of America Corp. BAC, -0.69%

Market participants were also digesting quarterly results, with Bank of America delivering a mixed picture, while Goldman Sachs Group Inc. GS, -1.83% smashed earnings expectations.

Investors digested a slew of quarterly results from major banks on Friday, when JPMorgan Chase & Co. JPM, -0.10%, Citigroup C, -0.76% and Wells Fargo WFC, +1.67% reported their earnings updates.

Which companies are in focus?

• Goldman shares fell 1.5% despite the bank and brokerage reporting fourth-quarter net income that more than doubled and beat expectations by a wide margin, and revenue that also topped Wall Street expectations.
• Shares of Bank of America were flat after reporting a fourth-quarter profit that beat expectations but saw revenue fall short, as global markets revenue rose less than forecast.
• Halliburton Co. HAL, +0.10% shares were down 0.1% after the oil-field services company reported a narrower loss, leaving it with adjusted earnings that topped expectations. Revenue also beat forecasts.
• Shares of Coherent Inc. COHR, +31.21% jumped more than 31% after Lumentum Holdings Inc. LITE, -10.13% said it would buy the maker of lasers and laser-related equipment in a cash-and-stock deal valued at $5.7 billion. Lumentum shares fell 11%.
• Shares of General Motors Co. GM, +8.87% shot up into record territory Tuesday, after the automaker said it was partnering with Microsoft Corp. MSFT, +1.87% to accelerate the commercialization of driverless cars.
• Tesla shares TSLA, +1.31% rose 2% after the electric vehicle market leader tweeted over the weekend that it has started official deliveries of its Model Y vehicles in China.

What are other markets doing?

• Treasury yield on the 10-year Treasury note TMUBMUSD10Y, 1.094% edged 0.5 basis point to 1.09%. Yields and bond prices move in opposite directions.
• The ICE U.S. Dollar Index DXY, -0.31%, a measure of the currency against a basket of six major rivals, fell 0.3%.
• Oil futures moved higher, with the U.S. benchmark CL00, +1.01% up 1% at $52.89 a barrel. Gold futures GC00, +0.48% gained ground, rising $10.30, or 0.6%, to settle at $1,840.20 an ounce. 
• European equities were little changed. The Stoxx 600 Europe index SXXP, -0.19% closed down 0.2%, while London’s FTSE 100 UKX, -0.11% edged down 0.1%.
• In Asia, the Shanghai Composite SHCOMP, -0.83% fell 0.8%, while Hong Kong’s Hang Seng Index HSI, +2.70% surged 2.7% and Japan’s Nikkei 225 NIK, +1.39% rose 1.4%.

-With assistance from Mark DeCambre