Wall Street reacts to pro-Trump protesters storming US Capitol

With the Democrats closing in on winning control of the United States Senate, the major US stock indexes opened in negative territory but quickly reversed those losses to climb firmly into the green, with the Dow and S&P 500 hitting new record highs.

But those gains were curbed and the tech-heavy Nasdaq Composite Index fell after the US Capitol was put under lockdown as outgoing President Donald Trump’s supporters stormed the building, sending legislators who were there to certify President-elect Joe Biden’s win into a secure location.

After drifting slightly lower at the opening bell, the Dow Jones Industrial Average reversed course and started climbing. The S&P 500 – a proxy for the health of US retirement and college savings accounts – also opened in the red before climbing.

It’s been a tumultuous day in US politics and investors are watching developments closely. The US Senate runoff races in Georgia have already seen Democratic challenger Raphael Warnock defeat Republican incumbent Kelly Loeffler, according to a projection by the Associated Press news agency. That puts the Democrats one seat away from wresting control of the Senate – the upper house of the US Congress – away from the Republicans.

The second Georgia runoff race between Democratic challenger Jon Ossoff and Republican incumbent David Purdue is still too close to call.

If the nailbiter Georgia runoff ends in a double win for the Democrats, it will dramatically increase President-elect Joe Biden’s chances of enacting his ambitious agenda for reviving the US economy from the ravages of COVID-19 while redressing festering inequalities that have worsened in the pandemic’s wake.

Wall Street investors see both benefits and drawbacks in Biden’s economic blueprint.

On the tax front, the president-elect would like Congress to raise the corporate tax rate from 21 percent to 28 percent, which would cut into corporate earnings.

Biden also wants to raise taxes on the wealthy – specifically people who make more than $400,000 a year – and reinstitute regulations that were rolled back by the administration of President Donald Trump.

But in what could prove a boon for stocks, Biden wants Congress to inject even more stimulus into the US economy – including more generous benefits for struggling households and small businesses wrestling with the fallout from COVID-19.

Massive government spending is growth positive for the economy, which can boost corporate profits, creating a windfall for investors.

That prospect is breathing life into financial stocks and other shares that were beaten up last year by the pandemic. Shares of JPMorgan Chase were up 4.58 percent in midday trading in New York, while shares of Goldman Sachs Group Inc were up more than 5 percent.

Meanwhile, tech stocks – which were on fire last year thanks to the massive shift to remote work and schooling, as well as online shopping – were under pressure on Tuesday.

Investors are also mulling fresh economic data. The US economy unexpectedly shed 123,000 jobs last month, according to the latest ADP National Employment Report. That is the first negative reading since April, driven by the reinstatement of business-sapping lockdowns designed to contain spiralling COVID-19 infections in the US.