It’s been a rollercoaster of a year for the U.S. financial markets, with the stock market reaching record highs and then plunging in response to pandemic-induced uncertainty. But with 2021 officially here, the markets are off to a strong start, with the Dow Jones Industrial Average and S&P 500 jumping more than 1.5% on their first day of trading.
The performance marked the second straight year of an impressive “New Year’s rally” for the stock market, with the strong gains helping to ease investor anxieties about the future. The hope is that the gains will continue as the global economy starts its gradual recovery from the pandemic.
The day’s gains were broad-based, with all 11 sectors of the S&P 500 ending the session in positive territory. The technology sector led the gains, rising more than 2.5%. It was followed by financials, consumer discretionary, industrial and communication services stocks, all gaining between 1.5% and 2%.
The rally was fueled in part by optimism over potential fiscal stimulus from the incoming Biden administration. There have been reports that the new president will move quickly to unveil a new economic stimulus package, and investors have been betting on the potential upside of such measures.
The Nasdaq Composite also posted gains on the session, with the tech-heavy exchange rising more than 1.2%. That was driven by strength in the tech names, as Apple and Microsoft both jumped more than 3%.
The strong gains on the first day of 2021 come after a tumultuous 2020 for the markets. The S&P 500 and the Nasdaq both ended the year with gains of just over 16%, while the Dow Jones Industrial Average and the Russell 2000 both ended the year with gains of more than 12%.
But even with those gains, the markets posted their first annual loss in three years, despite a strong fourth quarter performance. The tumultuous year extended into the fourth quarter, when the markets largely ignored the election of Joe Biden as U.S. president and instead continued to be driven by signs of an economic recovery and the progress of coronavirus vaccine development.
The strong start to 2021 gives investors hope that the markets will continue to rally in the coming months as the U.S. begins the process of reopening the economy and the vaccine rollout continues. With the first day of trading signaling that the markets are headed in the right direction, the hope is that the New Year’s rally will continue and provide investors with more upside.