Wall Street ends 2020 with new records

US stocks posted fresh highs to end a tumultuous year in which the S&P 500 rose 16pc, the Dow 7pc and the Nasdaq 43pc.

Despite the coronavirus shock, US indexes posted solid gains in 2020. Picture: AFP

US stocks spent the final session of the most tumultuous year in recent memory doing something rare for 2020: trading very quietly.

The Dow Jones Industrial Average rose 0.7 per cent. The S&P 500 added 0.6 per cent and the Nasdaq Composite climbed 0.1 per cent.

The blue-chip index and S&P 500 both settled at records.

Trading volumes have eased this week with many people taking year-end holidays.

Major indexes finished 2020 solidly. The Dow was up more than 7 per cent over the year, and the other indexes were even stronger. The S&P 500 was up over 16 per cent, the Russell 2000 was up 19 per cent, and the Nasdaq Composite was up a staggering 43 per cent.

Given the year’s challenges, many investors’ good fortune has “left them scratching their heads,” said Michael Arone, a strategist at State Street Global Advisors. The run has come with corporate earnings down in both years and revenue growth flat.

“That I think is amazing,” he said.

The tepid session ends a year that saw stocks rally back from their March rout, despite the economic fallout of the coronavirus pandemic. The unprecedented steps taken by governments and central banks to support economies encouraged investors to focus on prospects for growth despite the economic havoc.

That helped the three major indexes notch 100 record closes so far in 2020, with the Dow settling at its 13th all-time high of the year on Wednesday.

A record-breaking end to a big year. Picture: AFP

Money managers are hoping that the widespread rollout of vaccines will allow for the resumption of normal social and business activity, helping accelerate the economic rebound next year.

Fresh data on Thursday showed that 787,000 Americans applied for unemployment benefits for the first time through the week ended December 26, down from 806,000 in the week prior.

“When you look at the entire year, you could say policy makers drowned the black swan,” said Carsten Brzeski, global head of macro research at ING Groep.

Optimism grows

The sharp rally in recent weeks reflects investors’ optimism about the prospects for next year, Mr Brzeski said. “There is a hope we will see this synchronised global recovery in 2021.”

Riskier assets and momentum driven stocks have skyrocketed, along with big tech stocks including Tesla, Zoom Video Communications, Apple and Amazon.com.

Stock trading was muted as money managers hold off on making any big changes to portfolios ahead of the new year. Australian, US and European markets close Friday for New Year’s Day.

Some of the biggest concerns of the year -- such as hopes for COVID-19 vaccines, uncertainty around the November presidential elections, deteriorating U.S.-China trade relations, and the outcome of the U.K.’s negotiations with the European Union for a new trade deal -- have abated in recent weeks, investors said.

“Everything has settled now,” said Mr Brzeski. “For market participants, this is the moment to relax and recover.”

Overseas, the pan-continental Stoxx Europe 600 declined 0.3 per cent. The UK’s FTSE 100 Index fell 1.5 per cent after the British government announced tougher restrictions across England due to heightened COVID-19 infections.

In the eurozone meanwhile, the Paris CAC 40 stocks index closed down 0.9 per cent.

Frankfurt’s DAX 30 shut for the year on Wednesday with a daily drop of 0.3 per cent.

Bitcoin stood within sight of $US30,000 after hit another record high overnight on wave of enthusiasm for the world’s most popular cyber currency.

A broker at the stock exchange in Frankfurt. Picture: AFP

Pound jumps

Meanwhile the British pound zoomed to a 2.5-year dollar peak before Britain’s long-awaited exit from the European single market, with a trade deal in the bag on the final trading day of a coronavirus-ravaged 2020.

Sterling jumped to $US1.3686 in early morning deals to attain the highest level since April 2018, boosted also after Britain became the first nation to approve AstraZeneca’s cheap COVID-19 vaccine.

Britain’s departure from the European Union takes full effect at 10am (AEDT), just hours after much of the country was moved into the top tier-four coronavirus restrictions.

The nation left the bloc on January 31 but has been in a standstill transition while it sought a free-trade agreement -- which was finally clinched on Christmas Eve and was approved by lawmakers on Wednesday.

That dispelled long-running fears of a chaotic no-deal departure that could have sparked a double-dip downturn, after Britain tanked into a recession earlier this year on coronavirus fallout.

“A Brexit deal may have come extremely late in the day but there will be a massive sense of relief that the UK won’t be battling no-deal on top of everything else in the coming months -- and that relief can be seen in the pound,” OANDA analyst Craig Erlam said.

“It’s ending the year on a high... It’s all about the recovery now for the UK as it faces another devastating (virus) surge and most of the country moves into tier four.

“The UK has suffered more than most this year and the next couple of months is unlikely to be any better. It’s a long road to recovery and the Brexit deal will certainly help.”

Long dark shadow

Brexit and coronavirus have nevertheless cast a long dark shadow over global economies and stock markets this year, particularly in London which faced an annual loss of 14 per cent.

That was the worst slump since the notorious global financial crisis in 2008. Paris suffered a 7.1-per cent drop but Frankfurt gained 3.6 per cent in volatile record-breaking deals over the course of 2020.

“A turbulent and strange stock market year has come to an end,” said Comdirect analyst Andreas Lipkow.

Equities were slammed in the spring during the first wave of the pandemic. They have since rebounded somewhat, especially after the European Central Bank committed to an emergency pandemic asset-purchase program, increased to 1.85 trillion euros ($2.3 trillion) in December amid unprecedented global stimulus.

Dow Jones, AFP