Stocks Rise, Putting Dow, S&P 500 on Course for Records

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Stocks rose toward fresh records Monday as investors wagered that a new round of stimulus spending would bolster the economy.

The S&P 500 gained 0.2% in midday trading, continuing to advance after the broad-based index posted its biggest one-week advance since November and closed Friday at an all-time high.

The technology-heavy Nasdaq Composite and the Dow Jones Industrial Average both climbed 0.3%. All three indexes are on track to close at records.

Stocks have powered higher in recent trading sessions, putting the volatility sparked by swings in GameStop and other individual stocks in the rearview mirror. Investors are focusing on the prospect for a new batch of government spending. They say that could boost growth at a time when large companies are reporting robust profits but the broader economic outlook is patchy.

Democrats took a series of votes last week unlocking a process called reconciliation, which will allow the party to approve President Biden’s $1.9 trillion relief plan without Republican support in the Senate. House lawmakers are aiming to finalize and vote on a relief bill before the end of February.

The combination of strong quarterly earnings reports from some of the biggest American companies and the possibility of more relief for the economy has given markets a shot in the arm, according to Daniel Morris, chief market strategist at BNP Paribas Asset Management.

“It’s like your birthday and Christmas on the same day, and the markets are all happy,” said Mr. Morris.

Another round of stimulus spending in the U.S., a net importer, would also be a boon for overseas stock markets, according to Mr. Morris. “If you’ve got your growth motors of growth in the U.S. and China doing very well this year, that helps everyone,” he said.

Treasury Secretary Janet Yellen told CNN on Sunday that the U.S. could return to full employment next year if lawmakers pass Mr. Biden’s stimulus package.

Markets have also been buoyed by an upbeat set of earnings for the holiday quarter from large U.S. companies. Of the 295 companies on the S&P 500 that had reported by early Monday, 81% had beaten analysts’ expectations for earnings growth, according to FactSet.

Shares of Loews gained 1.3% on Monday after the insurance, hotel and energy company reported an increase in profit. Videogame company Take-Two Interactive Software and commercial real-estate firm Simon Property Group are due to report earnings after markets close.

Oil markets continued to rally, pushing Brent-crude futures above $60 a barrel for the first time since the start of the pandemic in January 2020. The international energy benchmark was up 1.6% in recent trading.

The oil rally helped make energy stocks the best-performing sector of the S&P 500. Overall, seven of the index’s 11 sectors were in positive territory on Monday, including materials and financials.

The market is in the midst of a broad “reflation trade” that’s fueling gains in sectors that were beaten down by last year’s coronavirus slowdown, as well as small-cap stocks and emerging markets, said Paul Christopher, head of global market strategy at the Wells Fargo Investment Institute.

He chalked up investors’ bullish mood to stimulus hopes, substantial savings the have piled up among U.S. consumers during the pandemic and hopes that Covid-19 vaccinations will let that money come pouring back into the economy later this year. “There’s a lot of dry powder on the sidelines waiting to be spent,” Mr. Christopher said.

Bitcoin jumped to more than $43,000, a gain of 15% over the past 24 hours, according to CoinDesk, after Tesla said it had invested $1.5 billion in the digital currency. The electric-vehicle maker said in a filing that it expects to begin accepting bitcoin as a form of payment soon. Tesla shares gained 1.5%.

In other corporate news, Palantir Technologies shares surged 7.5% after the data-analytics company said it was partnering with IBM on certain cloud applications for businesses.

Some stocks heavily favored by online traders on Reddit forums continued to shed value, after steep losses last week. GameStop fell 7.9%, while AMC Entertainment dropped 12%.

In Asia, the Shanghai Composite Index ended 1% higher. The Nikkei 225 rose 2.1% after Nikkei Asia reported that Japan will consider lifting a coronavirus state of emergency in some prefectures ahead of a new deadline.

SoftBank Group shares climbed more than 4% in Tokyo after the giant technology investor posted a $11 billion quarterly profit, largely on the back of investment gains.

In government bonds, the yield on 10-year Treasury slipped to 1.150% from 1.168% Friday. Bond yields move the opposite direction from prices.

SoftBank shares climbed after the Japanese investment giant posted a $11 billion profit.

Photo: charly triballeau/Agence France-Presse/Getty Images

Write to Joe Wallace at Joe.Wallace@wsj.com and Alexander Osipovich at alexander.osipovich@dowjones.com

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