Wall Street closes out wild pandemic year with Dow and S&P at record highs

Full recovery for the US economy still a way off as unemployment stays high

(FILES) In this file photo taken on December 09, 2020, a Salvation Army volunteer dances in front of the New York Stock exchange (NYSE) at Wall Street in New York City. From the start of the coronavirus pandemic that sent stocks crashing, to their resurgence after the approval of vaccines holding the best hope for eradicating the disease, Wal Street 2020 has been a year of extremes. / AFP / Angela Weiss
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US stocks ended a tumultuous year with the Dow and S&P 500 at record highs, as the three major US equity indexes notched solid-to-spectacular annual gains despite an economy upended by Covid-19.

In a year that marked the end of the longest bull market on record as pandemic-induced government lockdowns battered the global economy, equities stormed back.

The S&P 500 climbed more than 66 per cent from its March 23 low, resulting in the shortest bear market in history.

The gains, which sent the Dow and S&P to record highs to close out the year and the Nasdaq to a record this week, were fuelled in part by the large fiscal and monetary stimulus put in place and progress on a vaccine.

For the year, the S&P 500 gained 16.3 per cent, the Dow 7.2 per cent and the Nasdaq 43.6 per cent, which was the biggest yearly gain for the tech-heavy index since 2009.

"For broad indexes, this is a bullish year despite the craziness in the real world," said Mike Zigmont, head of research and trading at Harvest Volatility Management.

"It feels very much to me like investors have decided the world has changed forever.

"The coronavirus pandemic was the catalyst and now investors have decided who the winners are and who the losers are, and are moving forward."

But data released on Thursday was a reminder that the economy still has a long recovery ahead as weekly initial jobless claims, while declining for a second straight week to 787,000, remained well above the peak of the 2007-2009 recession.

Tech and consumer discretionary were the best performing sectors for the year, while energy, a laggard for the past decade, was once again the weakest of the 11 major S&P sectors and on the way to its worst yearly performance ever.

Companies such as Amazon and Apple helped to lift the broad S&P 500 and the Nasdaq, as well as gains in names that benefited from the stay-at-home environment, such as online retailer ETSY and digital payment platform PayPal.

Shares of Tesla, added to the benchmark S&P index on December 21, rose an astounding 743 per cent on the year.

For the session, the Dow Jones Industrial Average rose 196.92 points, or 0.65 per cent, to 30,606.48; the S&P 500 gained 24.03 points, or 0.64 per cent, to 3,756.07; and the Nasdaq Composite added 18.28 points, or 0.14 per cent, to 12,888.28.

All three major indexes gained ground, with the Dow and S&P 500 picking up steam in the session's final minutes to secure record highs.

Near-term expectations of bigger stimulus cheques dimmed after Senate majority leader Mitch McConnell blocked a quick vote on Wednesday to back President Donald Trump's call to increase Covid-19 relief checks to $2,000 from $600.

Risk assets were able to build on the rally off the March low, adding to gains in November after a US election that investors viewed as likely to result in political gridlock, and optimism around vaccine approvals grew.

But the momentum stalled on worries over new fiscal stimulus and a new, highly infectious Covid-19 variant spreading globally.

All eyes are on two US Senate races in Georgia next week, which will determine control of the chamber and influence Democratic president-elect Joe Biden's ability to enact his agenda.

Volume on US exchanges was 9.27 billion shares, compared with the 10.81 billion average for the full session over the past 20 trading days.

The S&P 500 posted 29 new 52-week highs and no new lows, while the Nasdaq Composite recorded 131 new highs and 21 new lows.