Shares rise after Yellen calls for more incentives

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Shares rose Friday after Treasury Secretary Janet Yellen said a major Covid-19 bailout is needed for a full US recovery

The Dow Jones Industrial Average rose 100 points, or 0.3%. The S&P 500 gained a similar 0.3%, while the Nasdaq Composite outperformed, up nearly 0.6%.

Cyclical stocks saw some of the strongest gains, with industrials, materials and energy rising 1.6%, 1.6% and 1.4%, respectively. Utility and consumer staples stocks were among the biggest laggards.

Applied Materials, which is used to make the devices used to make semiconductors, issued a better-than-expected forecast for the second quarter after Bell Thursday. The stock gained 7% on Friday. Other chip-related stocks also rose, including Lam Research, AMD, and Nvidia.

Yellen told CNBC on Thursday after the bell that further stimulus was needed, although some economic data suggests a recovery was already underway. She added that a $ 1.9 trillion economic agreement could help the US get back to full employment in a year.

“We think it’s very important to have a big package [that] addresses the pain this has caused – 15 million Americans are behind on their rent, 24 million adults and 12 million children who don’t have enough to eat, small businesses fail, “said Yellen Sara Eisen of CNBC during a” Closing Bell “interviews.

“I think the price of too little is much higher than the price of something big. We believe the benefits will far outweigh the costs in the long run,” she added.

Small-cap stocks, which also tend to track the ebb and flow of the economy as a whole, were well on their way to solid gains on Friday at the expense of some of the biggest market players. The Russell 2000 last rose 2% while Facebook, Amazon, Netflix and Microsoft fell.

Apple, which was down more than 4% this week, traded flat.

The record rally in the equity markets stalled a little this week as fears of rising interest rates and higher inflation crept in. The S&P 500 fell for a third straight day on Thursday after jobless claims were worse than expected and forecasts were weak from Walmart.

Friday’s gains were insufficient to adjust for the S&P 500’s losses for the week: the index fell 0.3% over the most recent period. The Dow Jones Industrial Average did better with a slight gain of 0.25%. The Nasdaq Composite is down 1.2% since trading closed last Friday.

Some investors said pessimism about a rate hike and the potential for inflation had kept Wall Street in check for the past few sessions. The 10-year government bond yield rose to its highest level in nearly a year this week, rising to 1.316% on Friday.

However, Yellen said she doesn’t think inflation should be the top concern.

“Inflation has been very low for over a decade, and you know that is a risk, but it is a risk that the Federal Reserve and others have tools to deal with,” she said. “The greater risk is scaring people as this pandemic is permanently affecting their lives and livelihoods for life.”

Many on Wall Street agree with Yellen that a huge incentive is needed and that a trillion dollar package, along with a smooth economic reopening this year, will keep the market rally continuing.

“Much of our deliberations for additional profit from here rests on an ongoing belief that the key drivers that helped bring the market up to date remain intact,” said Scott Wren, Wells Fargo’s leading global market strategist. in a note. One of the drivers is “an additional incentive from Congress that will help bridge the gap between now and the spread of vaccines”.

The House of Representatives will attempt to pass a $ 1.9 trillion coronavirus relief plan before the end of February, spokeswoman Nancy Pelosi said Thursday. Democratic Congress leaders could try to pass a package without a Republican vote.

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