US stocks closed higher on Tuesday after Treasury secretary nominee Janet Yellen made the case for large-scale fiscal stimulus to cushion the economic blow from Covid-19 during her confirmation hearing in Washington.
The benchmark S&P 500 index gained 0.8 per cent, while the tech-heavy Nasdaq Composite rose 1.5 per cent.
Ms Yellen voiced strong support for US president-elect Joe Biden’s $1.9tn relief package, arguing that “with interest rates at historic lows, the smartest thing we can do is act big”.
“In the long run, I believe the benefits will far outweigh the costs, especially if we care about helping people who have been struggling for a very long time,” the former Federal Reserve chair told the Senate finance committee.
Ms Yellen also underscored the need for targeted aid to small businesses, as well as direct support for state and local governments. She added that she would support the Treasury department looking into issuing longer-dated debt in order to take advantage of historically low borrowing costs.
US government bonds edged lower on Tuesday, sending 10-year yields 0.01 percentage points higher at one point to 1.1 per cent. The yield on 30-year notes steadied at 1.8 per cent. Yields rise as prices fall.
The coronavirus pandemic continues to loom large over global financial markets, and earnings season in the US will provide a fuller picture of its impact on the world’s largest economy.
“We’re expecting results from . . . Morgan Stanley, Procter & Gamble, Intel and Netflix [this week],” said Dean Cheeseman, portfolio manager at Janus Henderson. “This will give us a great understanding of the impact of the pandemic.”
On Tuesday Bank of America reported a leap in fourth-quarter net income of almost $600m, driven in part by the release of loan loss reserves and capital markets revenues. Its shares were flat, though, following a strong recent run.
Profits also jumped at Goldman Sachs, which posted net income of $4.5bn for the quarter, up 135 per cent year on year, as revenue rose 18 per cent to $11.7bn, the highest ever for a fourth quarter. Its shares fell 1.5 per cent.
In Europe, the continent-wide Stoxx 600 closed down 0.2 per cent. London’s FTSE 100 dropped 0.1 per cent and Germany’s Xetra Dax was 0.2 per cent lower.
In Hong Kong, shares in China Evergrande added almost 16 per cent after the country’s largest real estate group redeemed a $2bn convertible bond early.
Hong Kong’s Hang Seng index closed up 2.7 per cent on Tuesday to touch a 20-month high. Japan’s benchmark Topix climbed 0.6 per cent and South Korea’s Kospi 200 added 2.6 per cent.
The Hang Seng is up about 9 per cent in the year to date, making it among the best-performing big stock indices in 2021.
Chinese investors have snapped up Hong Kong stocks at a searing pace, making a record $3.1bn in net purchases of shares on Monday through market link-ups with bourses in Shanghai and Shenzhen.
In China, the CSI 300 index of Shanghai and Shenzhen-listed stocks shed 1.5 per cent on Tuesday.