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Dow Jones Breaks 30000 Points On Biden Transition
Wall Street hit another milestone as the Dow Jones breaks 30000 points for the first time ever. The index rose over 450 points to close Tuesday at 30,045. The Dow flirted at the 29,551.42 marks last February but took until November to reach 30,000. This milestone became more special despite a global pandemic. In addition, a wilder-than-usual US presidential election helped stir the pot.
RELATED: Dow Rises – Big – for First Time in Four Days
Biden Transition is a Go
The market received a boost as the General Services Administration finally acted. GSA Chief Emilie Murphy sent official word that the transition can start yesterday. This released millions of dollars in funds to help arrange the transfer of power. More importantly, the move eased market tension on whether the process will happen.
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After the announcement, President Donald Trump tweeted his support of the GSA’s move. He said he won't stand in the way of the transition, as this is “in the best interest of our country.” He thanked Murphy for her steadfastness in not caving in to pressure. However, he insisted that he has not given up the fight. Trump congratulated the Dow’s accomplishment yesterday, calling it a “sacred number.” He wanted to “congratulate the people of our country because there are no people like you.”
Choice of Treasury Secretary
Wall Street also reacted positively to Janet Yellen's nomination as Treasury Secretary. Previously, Yallen was chair of the Federal Reserve before current chairman Jerome Powell. Yellen faces the daunting task of leading economic recovery amid an ongoing pandemic. Once she assumes duty, Yellen needs to fix massive unemployment and even bigger debt.
Markets liked Yellen due to two factors. First, she's a labor economist. She supports government programs that help stimulate the economy. This includes stimulus relief programs that provide a lifeline to millions of Americans. Second, her experience at the Fed means she has a good working relationship with Powell from day one.
Long Time Coming
The headline “Dow Jones Breaks 30000 Level” could have arrived earlier this year. Then, coronavirus arrived and wiped out all earlier gains. The Down reached a low point in March when the index closed at 18,214. Thankfully, the Fed made a timely intervention. They slashed interest rates to near zero and helped arrange loan relief programs.
Emboldened with stimulus programs and low interest, investors continued buying aggressively. It helped that tech company became more valuable during the pandemic.
David Frisch of the Frisch Financial Group said the climate was perfect for the market. “Anytime you have an accommodating Fed, low-interest rates, more of an accommodative environment, the prospects are good for stocks,” he said. Remote work increased dependence on software and online tools. Companies like Apple, Microsoft. and Salesforce grew higher, and along with them the Dow Jones index.
Vaccine Prospects
Positive results on coronavirus vaccines boosted stock prices this month. A number of pharmaceutical companies applied for emergency use approval for their vaccines. Investors took this as a sign of a return to normalcy. Meanwhile, fresh new outbreaks all over threaten to lock down countries again. The increasing number of infections didn’t seem to deter the market. As a result, industries such as airlines, cruises, energy, and retail are enjoying a bumper week.
Meanwhile, the market needs to take stock of the situation. Experts warn investors from celebrating too much. While a vaccine approval can happen within days, it can still take months to reach Americans. Hercules Investment CEO James McDonald noted: “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.” He added: “An overnight recovery is impossible, let alone overnight growth that exceeds pre-Covid-19 levels.”
In the end, it’s Just a Number
Even as the Dow Jones breaks 30000 points, investors should remain guarded. In the end, 30,000 remains an arbitrary number for the Dow Jones Industrial Average. Specifically, achieving it is more a psychological target instead of a tangible goal. McDonald observed that “It is simply a continuation of the market’s euphoria after the pre-election selloff. At the end of the day, Dow 30,000 is just a number and the milestone doesn’t hold any credence in determining the near-term stock-market outlook.”
Ryan Detrick, the chief market strategist at LPL Financial, says that the milestone is “yet another reminder of how far stocks and the economy have come since the depths of March. Although 30,000 isn’t much different than 29,999, there is something special about those big milestone numbers.”
Watch the breaking report from CNBC as the Dow Jones Industrial Average breaks 30000 points for the first time:
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