By Joe Wallace and Michael Wursthorn
Political unrest in Washington didn't dent the stock market's ongoing rally Thursday, with U.S. stocks climbing toward fresh records.
Financial and technology stocks led Thursday's gains, pushing the S&P 500 up 1.5% and putting the broad index on pace to close at its first record of 2021. The Dow Jones Industrial Average also rose, adding 237 points to 31067, while the Nasdaq Composite jumped 2.5%, putting both of those benchmarks on track for new closing highs as well.
Investors largely looked past Wednesday's violent clash between pro- Trump protesters and law enforcement in the Capitol building that left four people dead, instead focusing on what the shift of political power from Republicans to Democrats means for the market.
The prospect of additional fiscal stimulus has again rose to the forefront of investors' minds after Democrats won control of the Senate by flipping two Republican seats in Georgia. A joint session of Congress early Thursday morning also affirmed Mr. Biden's defeat of President Trump, who committed to an orderly transition of power.
With the Senate, the House of Representatives and the White House in the hands of Democrats starting Jan. 20, priorities like boosting emergency relief payments to individuals to $2,000 will be easier to push through without the support of most Republicans, analysts say. Economic relief has become a front and center issue as cases, hospitalizations and deaths from Covid-19 soar, potentially hobbling the economic recovery.
"The expectation is now we've avoided a gridlock, and more fiscal support will be available to the economy through this coming year, rather than less," said Christopher Smart, chief global strategist at Barings.
Analysts described Thursday's trading action as a bet on reflation. Higher government borrowing and spending will support the economy and nudge inflation higher, which could lead to less support from the Federal Reserve.
Cyclical stocks usually do well in that environment, something investors are banking on now by pushing up share prices of financial firms, consumer discretionary and technology stocks like chip companies.
"Job. No. 1 for this [incoming] administration is to get Covid-19 under control and you got an economic recovery that the Democratic Party won't want to halt in the near term," said Ross Mayfield, an analyst at Baird. "So we're seeing a continuation of the reflation trade."
Tech stocks led Thursday's gains, with Nvidia, Advanced Micro Devices and Lam Research all rising more than 3%. Shares of banks broadly rose, with JPMorgan Chase, Bank of America and Wells Fargo gaining more than 2% each.
Other individual movers include DXC Technology, which rose 6%, after Reuters reported that France's Atos had made a takeover approach of more than $10 billion for the firm. Walgreens Boots Alliance rose 5.6% after reporting an increase in sales in its latest quarter.
A selloff in U.S. Treasurys extended as part of the reflation trade. The yield on the 10-year note ticked up to 1.082%, from 1.041% Wednesday. Bond yields rise as prices fall. The 10-year yield climbed past 1% for the first time since March on Wednesday on bets for increased U.S. stimulus.
"At the end of the day, the confidence in the institutions is still there," said George Efstathopoulos, multiasset fund manager at Fidelity International.
Investors are also tracking a flurry of data releases for fresh insight into the U.S. economy's fitful recovery. Jobless claims were nearly steady last week, slipping to 787,000 from a revised 790,000 the prior week as an extra $300 in benefits kicked in for laid-off workers. The Labor Department is scheduled to report December jobs figures Friday morning.
Overseas markets broadly advanced. The regionwide Stoxx Europe 600 index edged up 0.5%, led higher by shares of construction and materials companies.
In China, the Shanghai Composite Index added 0.7% to close at its highest in more than five years. South Korea's Kospi rose 2.1% to a fresh record high.
Hong Kong's Hang Seng slipped 0.5%, however. Shares of China's big three telecommunications operators, listed in Hong Kong, tumbled after the New York Stock Exchange reversed course for the second time in days and said it would proceed with a planned delisting. China Mobile, China Unicom and China Telecom dropped between 7% and 11%.
Also weighing on the Hong Kong market, shares of Alibaba Group lost 3.9% and Tencent fell 4.7%. The losses came after The Wall Street Journal reported that U.S. officials are considering prohibiting Americans from investing in the two technology giants.
-- Xie Yu contributed to this article.
Write to Joe Wallace at Joe.Wallace@wsj.com and Michael Wursthorn at Michael.Wursthorn@wsj.com
(END) Dow Jones Newswires
01-07-21 1534ET
