The Finance 202: Stock market rallies despite violent chaos engulfing the Capitol

Despite the sunny day on Wall Street, some of the finance industry’s top executives and analysts issued searing indictments of President Trump for inciting hundreds of his supporters, who then stormed the Capitol in an attempted coup. And some veteran market strategists marveled at the ability of investors to maintain their tunnel vision. 

“The market over the last few weeks has had an uncanny capacity to look past any near-term disruptions to the more stable environment we should see after Jan. 20,” when President-elect Joe Biden takes office, Compass Point Research & Trading analyst Isaac Boltansky tells me. “But we have to get to the 20th.” 

Boltansky thinks investors are underweighting the risks from such a rocky transition. But he notes they demonstrated an inclination over the last year “to buy stocks no matter what, because ultimately policymakers will take steps to ensure the market continues to move higher.” 

The Dow climbed 1.4 percent; the broader S&P 500 finished the day up 0.6 percent; and the tech-heavy Nasdaq dropped 0.6 percent. After rallying for most of the trading session, stocks gave back some of the gains starting around 2 p.m., as the situation in the Capitol deteriorated. “That wasn’t coincidental,” Ed Yardeni of Yardeni Research tells me. 

But the most consequential political news for investors came out of the Georgia Senate runoff elections, which Democrats swept, delivering the party control of the chamber. Investors interpreted the development as boosting the likelihood of more emergency relief spending from Washington. “The government coming in is going to secure more stimulus, and printing money and passing it out is good for stocks,” says Brian Battle, director of trading at Performance Trust Capital Partners in Chicago. 

The banking, retail and industrial sectors — poised to benefit from new stimulus and potential infrastructure spending — led the gains. And the prospect of higher federal spending drove the yield on 10-year U.S. Treasury note above 1 percent for the first time since March.

From Oxford Economics chief U.S. economist Greg Daco: 

Ed Mills, Washington policy analyst at Raymond James, tells me as the afternoon unfolded, he received more client questions about the potential blacklisting of Chinese company Alibaba than the potential for Trump to be removed from office. 

“Our elected leaders have a responsibility to call for an end to the violence, accept the results and, as our democracy has for hundreds of years, support the peaceful transition of power,” JPMorgan Chase CEO Jamie Dimon said in a statement to Bloomberg. Per that report, Visa CEO Al Kelly noted that “absolutely no facts since the election have surfaced to suggest that Biden’s victory is not totally legitimate.” 

And Blackstone CEO Stephen Schwarzman, arguably Trump’s biggest Wall Street booster, said the “insurrection that followed the president’s remarks today is appalling and an affront to the democratic values we hold dear as Americans.” 

Pershing Square’s Bill Ackman went further. In a tweet, he called on Trump to resign:

And the forecasters at High Frequency Economics in an email to clients said they were suspending their regular research notes — typically dry takes on Federal Reserve moves or the latest readings from economic indicators — for the first time since the September 11 attacks. 

“We at High Frequency Economics are disgusted by the role of the President of the United States in inciting this riot, and we are saddened that he cannot find the character to stand up in front of the mob he has created, quell the violence and send everyone home,” they wrote. “Responsibility for this outrage rests securely on his shoulders. He has lied, using the sanctity of his office to convince those with less power, income and resources than he to do his bidding.”

Most notably, Jay Timmons, head of the National Association of Manufacturers, in a statement said the assault on the Capitol amounted to “sedition and should be treated as such,” blaming Trump for inciting violence in an attempt to cling to power. Vice President Mike Pence, he said, “should seriously consider working with the Cabinet to invoke the 25th Amendment to preserve democracy.” 

Some chief executives may soon endorse removing the president from office before his term ends in two weeks. On a Tuesday conference call with about three dozen top CEOs, 91 percent said they believe Trump had already violated state law with his attempts at election interference. And 88 percent said Republicans were aiding his attempts at sedition, according to Yale School of Management professor Jeffrey Sonnenfeld, who convened it.

Sonnenfeld said all of the executives on the call agreed they would instruct their lobbyists to stop directing campaign money to lawmakers who support challenges to certifying Biden’s electoral college victory, and they are considering how else to hold them to account. 

Among those on the call, according to the Wall Street Journal: Walt Disney Co. Executive Chairman Robert Iger, Accenture CEO Julie Sweet, Merck CEO Ken Frazier, and Deloitte CEO Joseph Ucuzoglu. 

Lawmakers wrapped up the ceremonial process of certifying Biden’s electoral college victory in the dead of night. “Republicans had at one point planned to object to the electoral college votes in a series of states won by Biden, but after the storming of the Capitol, several GOP senators changed course, disputing only Arizona and Pennsylvania. Both challenges failed,” Roz Helderman, Karoun Demirjian, Seung Min Kim and Mike DeBonis report.

• Trump pledges an “orderly transition.” “The statement, tweeted by White House social media director Dan Scavino as Trump remained locked out of his own Twitter account, stops short of conceding or congratulating Biden. ‘Even though I totally disagree with the outcome of the election, and the facts bear me out, nevertheless there will be an orderly transition on January 20th,’ Trump said, noting that Congress’s action ‘represents the end of the greatest first term in presidential history.’”
• Senior administration officials discuss removing Trump from office. “Fearful that Trump could take actions resulting in further violence and death if he remains in office even for a few days, senior administration officials were discussing Wednesday night whether the Cabinet might invoke the 25th Amendment of the U.S. Constitution to force him out, said a person involved in the conversations,” Philip Rucker and company report. 

Matt Pottinger resigns, along with some other White House aides. The deputy national security advisor, a key figure formulating the Trump administration’s China policy and pandemic response, quit Wednesday afternoon in response to Trump’s reaction to the mob violence, CNN reports. 

• Two aides to First Lady Melania Trump and deputy White House press secretary Sarah Matthews also quit, per CNN.
• Others, including national security adviser Robert O’Brien and deputy chief of staff Chris Lidell, are considering following suit. The Post reports that could trigger “a cascade of other resignations from inside the already hollowed-out West Wing.”

The social media giant temporarily banned the president: “The lockout, which will last for 12 hours, also included the removal of three tweets and a warning that Trump could be subject to a permanent suspension if he continues tweeting baseless conspiracy theories about the election and inciting violence,” Tony Romm, Elizabeth Dwoskin and Drew Harwell report.

“Facebook followed, blocking the president’s account for the first time for 24 hours for what it said were two policy violations, although it didn’t threaten permanent suspension. It also said it was blocking his Facebook-owned Instagram account.”

Jon Ossoff is the projected to complete the sweep of Georgia runoffs: “With almost all of the votes counted, Democrat Raphael Warnock was leading Sen. Kelly Loeffler, a Republican appointed to the seat, by 1.6 percentage points, or over 73,000 votes. In the second contest, Ossoff led by just under one percentage point, or nearly 36,000 votes, over David Perdue, a Republican whose Senate term expired on Sunday,” Michael Scherer reports.

“For Biden and his fellow Democrats, the results were a stunning and unexpected boon — the party’s House majority shrank precipitously as a result of November’s voting, and the president-elect has faced an onslaught of attempts to overturn the results by Trump and his supporters. Had Republicans maintained control, his priorities could have been quashed by the Senate.”

• Merrick Garland is back: “Biden plans to nominate the federal judge, a Democratic casualty of the bitter partisan divide in Washington, to be the next attorney general, tasked with restoring the Justice Department’s independence and credibility,” Matt Zapotosky, Devlin Barrett and Ann E. Marimow report.

Biden is also filling out other top Justice Department posts, per NBC News’s Geoff Bennett:

• E.U.-China deal may complicate things for Biden: “The timing — with a newly aggressive China seen as a strategic rival to the United States and just weeks before Biden becomes president — has opened the European Union to questions and criticism, from analysts and particularly American officials, that perhaps the deal was a diplomatic and political error,” the Times’s Steven Erlanger reports.

Here’s what else the latest minutes showed: “The Federal Open Market Committee held interest rates near zero and strengthened its commitment to bond buying at the meeting, pledging to maintain a $120 billion monthly pace of purchases until there is ‘substantial further progress’ toward its employment and inflation goals,” Bloomberg News’s Steve Matthews reports.

“Chair Jerome Powell described the new guidance as ‘powerful,’ though both policy makers and investors have since struggled to agree on what would trigger a tapering in asset purchases. Cleveland Fed President Loretta Mester said this week she’s not expecting a reduction in asset buying until 2022, while Atlanta Fed chief Raphael Bostic said tapering could happen this year if vaccine distribution improves the outlook.”

• Central bank officials also fretted over the latest covid surge: “’With the pandemic worsening across the country, the expansion was expected to slow even further in coming months,’ according to minutes from the gathering of the Federal Open Market Committee. ‘Nevertheless, the positive vaccine news’ was ‘viewed as favorable for the medium-term economic outlook,'” the New York Times’s Jeanna Smialek reports.

Private payrolls report for December shows first drop since April. “The decrease of 123,000 provided a sign that the U.S. economy had cooled considerably heading into the end of 2020. Economists surveyed by Dow Jones had been expecting growth of 60,000,” CNBC’s Jeff Cox reports. “December’s decline countered seven straight months of job growth coming out of the massive furloughs instituted in March and April as large swaths of the U.S. economy shut down to combat the Covid-19 spread.”

The exchange has faced pressure from the Trump administration: “The New York Stock Exchange is proceeding with a plan to delist three major Chinese telecommunications firms, its second about-face this week, after Treasury Secretary Steven Mnuchin disagreed with its shock decision to give the companies a reprieve,” Bloomberg News’s Lananh Nguyen and Saleha Mohsin report.

“The pivot comes after the exchange’s earlier move caught U.S. officials off guard. The exasperation reached the highest levels of the administration of Trump, who signed an executive order in November requiring investors to pull out of Chinese businesses deemed a threat to U.S. national security. The NYSE’s back-and-forth moves have also sown deep confusion in global financial markets.”

The grocery chain says the change is a result of a new California law: “Albertsons, a multibillion-dollar grocery chain that debuted a public offering last year, said it made the decision in December to lay off delivery staff in many areas around the country and switch to ‘third-party logistics providers.’ The company has been partnering with the gig delivery service DoorDash since 2018,” Eli Rosenberg reports.

“The news about Albertsons’s grocery brands Vons and Pavilions, which was first reported by Los Angeles news site Knock, was greeted with a chorus of outrage from liberals and labor advocates in California, who have long warned that Prop. 22, the ballot proposition that gave gig companies the ability to deny workers protections such as the state-mandated minimum wage and overtime by classifying them as contractors and not employees, would result in job losses and give employers even more incentive to limit the compensation and benefits available to workers.”

Hank Paulson returns to finance: “This week, after months of calls and meetings that followed with Jon Winkelried, TPG’s co-chief executive — Paulson’s friend and former colleague when he ran Goldman Sachs — Paulson will become the executive chairman of a new global fund, TPG Rise Climate,” the Times’s Andrew Ross Sorkin reports of an effort that began with Bono.

“The move brings Paulson, 74, back to the finance industry for the first time since he left Goldman to become Treasury secretary in 2006. It may also signal a turning point for the weight and seriousness given to climate-related investments. TPG’s co-founder Jim Coulter is planning to shift much of his focus to the new climate fund.”

This isn’t a chart, but it speaks volumes. Side-by-side photos from the West Front of the Capitol comparing the scene at Trump’s inauguration, during which he pledged to end “American carnage,” and yesterday the mob of his supporters stormed the building. Via MSNBC’s 11th Hour:

• The Labor Department releases the latest weekly jobless claims

• The Labor Department releases the December jobs report