Stocks climbed higher amid the COVID-19 vaccine rollout and an improving outlook for a fiscal stimulus bill. The Dow Jones Industrial Average, which has lagged all year, gained 0.44%. The Standard & Poor’s 500 picked up 1.25% while the Nasdaq Composite index surged 3.05%. The MSCI EAFE index, which tracks developed overseas stock markets, rose 2.44%.1,2,3
Stocks Climb Higher
In a week that celebrated the national rollout of a COVID-19 vaccine, market enthusiasm was tempered by worries of infection caseload and fresh economic lockdowns. Investors turned their focus to the fiscal stimulus negotiations in Washington, D.C., with the hope that a relief bill may be the bridge that gets the economy over its near-term troubles until vaccine distribution grows more widespread.
These negotiations were not smooth sailing. When a compromise bill appeared to gather support, markets quickly moved higher, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all setting new record high closes on Thursday.4 Stocks slipped in the final day of trading as stimulus hopes wavered.
Fed Outlook on Economy Improves
The Federal Reserve on Wednesday concluded its last meeting of the Federal Open Market Committee for 2020. Fed officials provided more detail for its monthly bond purchase program and reiterated their commitment to a monthly purchase of $120 billion of Treasury and mortgage-back securities until its inflation and employment goals are met.5
The Federal Reserve also raised its outlook on the U.S. economy. It revised its September forecast of a 3.7% decline in GDP in 2020 to a 2.4% decline, and increased its 2021 GDP growth forecast from 4.0% to 4.2%. It also expects unemployment at 2020 year-end would fall to 6.7%, substantially lower than its earlier estimate of 7.6%.6
Footnotes and Sources
1. The Wall Street Journal, December 18, 2020
2. The Wall Street Journal, December 18, 2020
3. The Wall Street Journal, December 18, 2020
4. CNBC, December 17, 2020
5. The Wall Street Journal, December 16, 2020
6. CNBC, December 16,2020
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Weekly Market Insights: Vaccine Rollout Spurs Markets
December 21, 2020