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Urged on by the president, Trump supporters went on a rampage, damaging property and forcing lawmakers to take cover in an unprecedented assault on American democracy. Business leaders condemned the violence, but investors appeared unfazed, and the Dow still managed to end the day at an all-time high.
What happened: The Dow climbed 438 points, or 1.4%, while the S&P 500 gained 0.6%. US stock futures are up Thursday, indicating more all-time highs could be on the cards.
That disconnect may seem startling. Assessing the mentality on Wall Street, however, there are three main drivers of the performance.
“Even as the protesters marched to the Capitol building, stock markets stoically marched higher,” Rabobank analyst Bas van Geffen said. “The rationalization of these moves is a focus on the longer term: with the Democrats now looking set for majority in both the House and the Senate, President-elect Biden will have the Congressional support to implement a new fiscal stimulus package, including new stimulus checks.”
It’s a theme that reigned supreme over the past 10 months: Even in the middle of historic tumult, including a pandemic and extreme instability in the world’s top economy, markets have set records, feeding concerns about a growing divide between Wall Street and Main Street.
That said: This time around, Main Street and Wall Street could both benefit. Following the Georgia elections, Goldman Sachs raised its growth forecasts for the US economy, predicting output will now expand by 6.4% this year, up from 5.9%. That’s based on the assumption that Congress will now be able to pass a $750 billion stimulus package, including $300 billion in stimulus checks.
The pandemic is poised to get worse before it gets better, and the political situation in the United States is generating global alarm. But investors, at least, aren’t panicking.
Business leaders condemn Washington riots
- Apple ( CEO Tim Cook: “Today marks a sad and shameful chapter in our nation’s history. Those responsible for this insurrection should be held to account, and we must complete the transition to President-elect Biden’s administration. It’s especially when they are challenged that our ideals matter most.” )
- Ford ( CEO Jim Farley: “The Ford Motor Company condemns the violent and antidemocratic actions today. These were destructive acts against our shared principles and beliefs of a peaceful transition of power. We commit to working together, with respect and empathy, to uphold core American values.” )
- Goldman Sachs ( CEO David Solomon: “For years, our democracy has built a reservoir of goodwill around the world that brings important benefits for our citizens. Recently, we have squandered that goodwill at an alarming pace, and today’s attack on the US Capitol does further damage.” )
It’s a sign that executives view the mob action as a serious business risk, as well as a serious threat to democracy. Some leaders went even further.
The National Association of Manufacturers, an influential business lobby, called on Vice President Mike Pence Wednesday to consider removing Trump from office.
Pence “should seriously consider working with the Cabinet to invoke the 25th Amendment to preserve democracy,” NAM CEO Jay Timmons, a former Republican political operative, said in a statement.
Jeffrey Sonnenfeld, founder of Yale University’s Chief Executive Leadership Institute, said the condemnation from NAM is unprecedented.
“Everyone in the business community is horrified,” Sonnenfeld told my CNN Business colleague Matt Egan.
Sonnenfeld agreed with NAM’s call for Pence and the Cabinet to consider leveraging the 25th Amendment. “The business community will give them backup,” he said.
NYSE bans Chinese telecom stocks in second about-face
The NYSE has now abruptly changed its position on the issue twice, sowing confusion among investors and whipsawing the companies’ stocks.
The exchange first announced last week that it would bar shares of China Mobile, China Telecom and China Unicom. But it reversed course on Monday, citing “further consultation with relevant regulatory authorities.”
By Wednesday, the exchange had reverted to its original position, citing “new specific guidance” from the US Treasury Department that was delivered on Tuesday.
Investor insight: The bizarre back-and-forth has left investors in the lurch. The three companies are also listed in Hong Kong, where shares plunged Thursday. China Mobile’s stock dropped 7.2%, while China Telecom lost 9.4% and China Unicom plummeted 11.4%.
Initial claims for US unemployment benefits from last week post at 8:30 a.m. ET. Economists surveyed by Refinitiv expect them to rise to 800,000.
Also today: The ISM Non-Manufacturing Index for December arrives at 10 a.m. ET.
Coming tomorrow: The latest US jobs report could show that the country added just 71,000 jobs in December, an alarming slowdown.