Market Coverage: Tuesday December 29th Yahoo Finance

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Stocks were mostly higher Tuesday morning and hit fresh record intraday highs yet again, building on Monday’s record closing levels.

The three major indices touched record levels but pared some gains mid-morning, however, and the Nasdaq turned slightly negative. Stocks poised to benefit most from fiscal support and a strong economic recovery including cruise lines, airlines and hotel shares extended gains.

The rise came after President Donald Trump signed into law Congress’s $900 billion virus relief bill, despite suggesting he might block the package last week. After Trump signed off on the package, Goldman Sachs economists upgraded their forecast for first-quarter gross domestic product growth to 5% from 3% annualized, citing the boost to consumer spending the $900 billion stimulus package would confer.

Some equity strategists, however, had already priced in the outcome of more fiscal stimulus.

“This stimulus package — even though Trump had a little bit of posturing there – we expected this to go through. The news of it going through is not new news to anybody who was looking at the equity markets on a long-term basis,” Brian Walsh, Jr., Walsh & Nicholson Financial Group senior financial advisor, told Yahoo Finance. “The $600 stimulus, though, is weak from an individual standpoint. What that’s actually going to do for people in need is yet to be seen. But the package itself is robust, and it is helping small businesses. We’ll see how it fares.”

Late Tuesday, the U.S. House of Representatives voted to pass a bill increasing the stimulus checks to $2,000 from $600, as Trump had demanded last week. However, it remains unclear when or whether the GOP-controlled Senate would take up the bill for a vote. And many Republican members of the chamber previously opposed any payment sum greater than that already included in the $900 billion stimulus package.

Stimulus developments aside, U.S. equities are also likely benefiting from the seasonal period deemed the “Santa Claus Rally,” which extends over the final five trading days of the year and into the first two sessions of the new year. Over the past 50 years, stocks have ended this period higher 77.9% of the time, and with an average gain of 1.33% for one of the best seven-day periods of the year, according to LPL Financial.

The three major indices are also set to post strong returns this year, after rallying strongly off of their lows in March and flipping from bear to bull market with record velocity. As of Monday’s close, the S&P 500 was heading toward a 15.6% rise in 2020, the Dow for a 6.5% advance, and the Nasdaq for a staggering 44% jump as Big Tech and software stocks outperformed for much of the year.

As more businesses reopen and a semblance of pre-pandemic life returns in 2021, some strategists are looking for more of a rotation into the “reopening” and “epicenter” stocks hardest hit earlier this year, as these companies begin to recover.

“We think the rotation trade is still in play and so when we look back and take stock of 2020, as we come to the end of the year energy and financials are really still the laggards. So we think there’s some room for them to catch up, particularly as we get to reopening,” Rob Haworth, U.S. Bank Wealth Management senior investment strategist, told Yahoo Finance. “In the long term, innovation and growth still remain really important, which is why we say for a secular trade, for the long-term, still look on dips to pick up technology, health care, e-commerce sorts of names, but in the short-term as we get to reopening there’s certainly some room for earnings and revenue to catch up for these companies that have been so hard-hit in 2020.”

11:00 a.m. ET: Stocks pare gains, Nasdaq turns negative
Here were the main moves in markets, as of 11:01 a.m. ET:

S&P 500 (^GSPC): 3,739.74, up 4.38 points or 0.12%

Dow (^DJI): 30,449.94, up 45.97 points or 0.15%

Nasdaq (^IXIC): 12,871.27, down 28.15 points or 0.22%

Crude (CL=F): +$0.63 (+1.32%) to $48.25 a barrel

Gold (GC=F): +$4.50 (+0.24%) to $1,884.90 per ounce

10-year Treasury (^TNX): +0.2 bps to yield 0.935%

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