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Why the Stock Market Is Down on the First Trading Day of 2021

After closing 2020 at record highs, major United States benchmark indices ended the first trading day of 2021 in the red.

The Dow Jones Industrial Average was down more than 380 points, or 1.25%, as of 4:00 p.m. ET, while the S&P 500 and Nasdaq Composite declined a respective 55 points, or 1.48%, and nearly 190 points, or 1.47%. During the day, the Dow and S&P had been heading for their biggest single-day selloff since late October, and the Nasdaq was on pace for its worst daily performance since last month.

Investors appeared to kick off the new year with fresh COVID-19 concerns as the number of cases in the U.S. surpassed 20 million over the weekend, with the illness claiming the lives of at least 352,000 people. They also had their sights set on Georgia, which is preparing for Senate runoff elections that will determine which party gets to hold a majority in the chamber and affect the trajectory of President-Elect Joe Biden’s term in office.

On Dec. 31, the Dow saw a record close of 30,606.48, and the S&P pulled off an all-time high to end the day at 3,756.07. For the year as a whole, the Dow improved 7.3%, while the S&P grew 16.3% and the Nasdaq surged a whopping 43.6% — its best year since 2009 — as traders snapped up tech stocks. Although a surge in coronavirus infections in recent months has threatened the reopenings of many metropolitan cities, the promise of effective vaccines and the recently enacted federal aid has stoked optimism on Wall Street.

Last week, President Donald Trump signed into law the $900 billion stimulus package approved by Congress that includes $600 in direct payments to individuals as well as an additional $300 a week for the unemployed. The checks have begun to roll out to Americans’ bank accounts, and leaders across the retail industry have hailed the passage of the relief bill as millions of families and businesses struggle financially due to the persistent health crisis.

“As we closed out 2020, it was an end to a whirlwind year whose challenging economic environment will almost certainly continue in 2021,” National Retail Federation chief economist Jack Kleinhenz added in a statement today. “The coming year might be just as eventful as the economic recovery faces many uncertainties. Recoveries do not proceed in a straight line, and the prospects for volatility over the next few months are high.”

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