Wall Street witnessed further growth on two of its key stock indices yesterday (Wednesday December 16), after the Federal Reserve announced that prospects for the American economy had improved since September, despite the country's ongoing struggle to contain the coronavirus pandemic.
Both the Nasdaq Composite and the S&P 500 closed higher, but the Dow Jones Industrial Average saw a slight dip.
Investors also took confidence from signs that Congress was nearing agreement on a $900 billion (£662 billion) economic stimulus package.
The Nasdaq closed at an all-time high of 12,658 points on Wednesday, having gained 0.5% over the course of the day. The tech-focused index has enjoyed a return to form this week, having dropped by 1.6% between Wednesday and Friday last week.
Meanwhile, the S&P approached new records but closed slightly lower than its all-time high. It was up nearly 0.2% on the day.
The Dow struggled to break out of the red over the course of the day's trading, dropping by up to 0.3% at times and eventually closing down 0.15%.
Vishnu Varathan, head economist at Mizuho Bank in Singapore, told Reuters there is a strong possibility that markets will extend this rally, thanks to the promise of monetary policy support from the Fed and the global rollout of Covid-19 vaccines.
"If new infection numbers don't go crazy...I think there is some scope for a so-called Santa rally into the end of the year," he said. "That's what markets appear to be poised for."
Investors certainly appeared to take confidence from comments made by Fed chairman Jerome Powell, who expressed optimism that widespread distribution of vaccines would mitigate the impact of the pandemic on the US economy in 2021.
However, he also warned that the coming months will be "particularly challenging" as the country continues to battle increasing coronavirus cases.
"You have to think that sometime in the middle of next year, you will see people comfortable going out and engaging in a broad range of activities," he said. "The issue is more the next four or five months."
Forecasts from the central bank suggested growth of approximately 4.2% in the US economy next year, which is an improvement from previous projections. Unemployment is expected to drop from 6.7% to 5%.
The Fed also committed to providing further monetary policy support for the economy as it recovers from the impact of the pandemic.
Meanwhile, in Washington, congressional negotiators were reportedly closing in on an aid bill that will include $600 to $700 individual stimulus cheques and extended unemployment benefits.
Republican Senate majority leader Mitch McConnell said lawmakers had "made major headway" towards finalising a "targeted pandemic relief package".
"We need vaccine distribution money, we need to re-up the Paycheck Protection Program to save jobs, we need to continue to provide for laid-off Americans," he added.
The European picture
European markets also saw a positive day's trading on Wednesday, with the FTSE 100 closing 0.7% higher. London's blue chip index made a positive start to the day on Thursday, but steadily dropped off to finish the morning session largely flat.
In Germany, the DAX posted strong gains of 1.5% on Wednesday and rose by a further 0.8% this morning, while France's CAC 40 has followed a similarly positive trend.
Developments on these indices in the coming days are likely to be influenced by the latest news on Brexit. A permanent trade deal between London and Brussels is still uncertain, two weeks before the UK's scheduled departure from the EU.
Michel Barnier, the EU's chief negotiator, said "good progress" has been made, but there are still "stumbling blocks" that could prevent a deal from being agreed.
Cabinet minister Michael Gove insisted the UK is prepared to do "everything to secure a deal" before the country finally leaves the bloc on December 31.