The Dow Jones Industrial Average topped 30,000 for the first time and investors piled into risk assets as a series of market-friendly developments unleashed animal spirits on Wall Street.
The S&P 500 index hit a record, spurred by the formal start of President-elect Joe Biden's transition, news that all but removed the threat of a contested transfer of power. Investors also woke up with a clear sense of what Mr. Biden's Treasury Department will have in policy preferences after it was reported he planned to nominate Janet Yellen to the post. A third promising vaccine candidate added to the euphoria, boosting bets that the economy can soar next year.
The rotation into risk assets was widespread. Small caps in the Russell 2000 added another 1.8%, pushing its November rally past 20%. Tesla Inc. tacked on another 5% and is now worth $500 billion. Carnival Corp. jumped 10%, Planet Fitness Inc. rose 9% and MGM Resorts International added 7%. Four stocks rose for every one that fell in the S&P 500, while only three Dow companies dropped. Bitcoin rose to a three-year high, topping $19,000 as it closed in on a record.
The record runs come in the face of more troubling news on the virus front, with cases rising and more states enacting restrictions ahead of the Thanksgiving holiday. Wednesday will also bring a flood of economic indicators, from jobless claims to readings on consumer confidence and personal income. Trading volumes have been elevated in what is normally a calm week. More than 12 billion shares changed hands Monday, up 75% from the Monday before last year's holiday.
"There's nothing else to buy. People have this excess cash and they're buying into the market and they're chasing it," said Gene Goldman, CIO at Cetera Financial Group. "People are ignoring the short term and just jumping in and buying. All the short-terms news is being ignored for long-term optimism."
Energy companies in the S&P 500 surged 4% on the back of oil's advance past $45 a barrel for the first time since March. The dollar weakened vs. major peers and Treasuries slipped. Gold fell toward $1,800 an ounce.
As the S&P 500 pushes its November surge past 11%, a growing chorus is saying the rally can persist. Even after the latest advance, four of the 11 S&P 500 groups remain at least 8% below when the index set a record on Feb. 19. Expectation is mounting that as investors grow confident the vaccine will spark an economic boom, cash will continue flooding into the likes of banks, utilities and energy companies that have underperformed.
"Everybody's just ecstatic with the vaccine news," said Jerry Braakman, CIO of First American Trust, which manages about $2 billion. "We had to slug through the election results, there's a sense of relief that we didn't decay into anarchy. That was definitely holding back the economy. We know how well stock markets do with recovery and its vision ahead. That's normally the best time for markets."
The rotation has been on display all month. Energy shares have surged almost 40%, while financial firms have rallied about 20%. Treasury yields have advanced and gold has stumbled.
"Even though we've seen this pretty sharp rotation into cyclical stocks, we think this could go on for much longer given how unbalanced many investors' portfolios are when it comes to growth and value," said Bill Callahan, investment strategist at Schroders. "Prior to the vaccine announcement the market wasn't sure how long we would be in this state of economic limbo, but with the vaccine announcement it really doesn't matter if the vaccine is distributed in the second quarter or third quarter next year, there is a light at the end of the tunnel."