NEW YORK (Reuters) -The S&P 500 closed in positive territory on Wednesday as an expected stimulus deal and falling jobless claims prompted investors to put their money into sectors most likely to benefit from the economy re-opening when it recovers from the global health crisis.
While the blue-chip Dow and and small caps led the gains, the tech-heavy Nasdaq ended the session slightly lower.
Economically vulnerable cyclical stocks, which were battered by mandated shutdowns and stand to benefit most from economic recovery, were outperforming.
The rotation into cyclicals reflects a growing confidence in recovery from the pandemic recession, and began in fits and starts after promising late-stage vaccine data was released in early November.
“It’s a very welcoming sign to see rotation into beaten down sectors,” said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Massachusetts. “It speaks to the importance to valuation and the importance of diversification.”
“It also speaks to the hope that is out there,” Keator added. “When you see oil pick up and travel and tourism industries pick up, it speaks to the market looking forward and pricing in that hope.”
The possibility of a year-end shutdown of the U.S. government, not to mention the lack of new fiscal stimulus, raised its head after President Donald Trump threatened to veto a $2.3 trillion funding package, which also includes a long-awaited $892 billion pandemic relief deal.
A Brexit trade deal between Britain and the European Union appeared more likely after a senior European diplomat told Reuters that an agreement could be imminent.
A raft of mixed economic data showed a welcome decrease in jobless claims and an uptick in new orders for durable goods, but also a pullback in consumer spending, dropping personal income and fading sentiment as the holiday shopping season nears its end amid a resurgent pandemic.
But languid inflation data provided further assurance that the U.S. Federal Reserve is likely to maintain its accommodative monetary policy at least until 2024.
Unofficially, the Dow Jones Industrial Average rose 113.96 points, or 0.38%, to 30,129.47, the S&P 500 gained 2.72 points, or 0.07%, to 3,689.98 and the Nasdaq Composite dropped 36.80 points, or 0.29%, to 12,771.11.
Drugmaker Pfizer Inc rose following a deal with the United States to supply 100 million additional doses of its COVID-19 vaccine by July.
Merck & Co Inc agreed to supply the U.S. government with up to 100,000 doses of its COVID-19 treatment, sending its stock higher.
Supernus Pharmaceuticals Inc surged after its experimental drug for attention deficit hyperactivity disorder met the main goal of a late-stage study in adults.
Shares of Nikola Corp plunged after it called off a deal to develop electric garbage trucks with recycling and waste disposal firm Republic Services Inc.
American Airlines Group and United Airlines Holdings advanced after revealing plans to bring back furloughed employees this month. The airline industry is hoping to receive about $15 billion in payroll support as part of the pending fiscal relief package.
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