UKX FTSE 100 Index

By Caitlin Ostroff and Paul Vigna 

U.S. stocks spent the final session of the most tumultuous year in recent memory doing something rare for 2020: trading very quietly.

The Dow Jones Industrial Average fell around 18 points, or less than 0.1%. The S&P 500 slipped less than 0.1% and the Nasdaq Composite declined 0.2%. Trading volumes have eased this week with many people taking year-end holidays.

Major indexes are on track to finish 2020 solidly. The Dow was up more than 6% year to date entering Thursday's session, and the other indexes were even stronger. The S&P 500 was up 15%, the Russell 2000 was up 19%, and the Nasdaq Composite was up 43%.

Adding those gains to 2019 gives the S&P and Nasdaq their best two-year run since 1998 and 1999, the height of the dot-com boom. For the Dow, it represents the best two-year run since 2017.

Given the year's challenges, many investors' good fortune has "left them scratching their heads," said Michael Arone, a strategist at State Street Global Advisors. The run has come with corporate earnings down in both years and revenue growth flat.

"That I think is amazing," he said.

The tepid session ends a year that saw stocks rally back from their March rout, despite the economic fallout of the coronavirus pandemic. The unprecedented steps taken by governments and central banks to support economies encouraged investors to focus on prospects for growth despite the economic havoc.

That helped the three major indexes notch 100 record closes so far in 2020, with the Dow settling at its 13th all-time high of the year on Wednesday.

Money managers are hoping that the widespread rollout of vaccines will allow for the resumption of normal social and business activity, helping accelerate the economic rebound next year.

Fresh data on Thursday showed that 787,000 Americans applied for unemployment benefits for the first time through the week ended Dec. 26, down from 806,000 in the week prior.

"When you look at the entire year, you could say policy makers drowned the black swan," said Carsten Brzeski, global head of macro research at ING Groep.

The sharp rally in recent weeks reflects investors' optimism about the prospects for next year, Mr. Brzeski said. "There is a hope we will see this synchronized global recovery in 2021."

Riskier assets and momentum driven stocks have skyrocketed, along with big tech stocks. Tesla Inc. soared 755% this year. Zoom Video Communications gained 404%. Apple is up 81%. Amazon added 76%.

The iShares iBoxx junk-bond exchange traded fund is up 4.1% this year. The digital currency bitcoin is up a blistering 300% year to date, and traded over $29,000 for the first tie in its history on Thursday.

On Thursday, though, stock trading was muted as money managers hold off on making any big changes to portfolios ahead of the new year. U.S. and European markets will be closed Friday for New Year's Day.

Some of the biggest concerns of the year -- such as hopes for Covid-19 vaccines, uncertainty around the November presidential elections, deteriorating U.S.-China trade relations, and the outcome of the U.K.'s negotiations with the European Union for a new trade deal -- have abated in recent weeks, investors said.

"Everything has settled now," said Mr. Brzeski. "For market participants, this is the moment to relax and recover."

Tribune Publishing rose 8.3% after The Wall Street Journal reported that a hedge fund that owns a big stake in it is seeking to buy the newspaper chain.

Shares of Enphase Energy rose 1.6% after S&P Dow Jones Indices said that the company will replace Tiffany in the S&P 500 index from Jan. 7. Tiffany is being acquired by LVMH Moet Hennessy-Louis Vuitton.

In bond markets, the yield on the 10-year Treasury note fell to 0.916%, compared with 0.926% Wednesday.

Overseas, the pan-continental Stoxx Europe 600 declined 0.3%. The U.K.'s FTSE 100 Index fell 1.5% after the British government announced tougher restrictions across England due to heightened Covid-19 infections.

In Asia, China's Shanghai Composite gained 1.7% by the close of trading, while Hong Kong's Hang Seng ticked up 0.3%.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Paul Vigna at paul.vigna@wsj.com

(END) Dow Jones Newswires

December 31, 2020 13:57 ET (18:57 GMT)

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