New York, Jan 20 (AP) US stocks are rallying to records Wednesday on stronger-than-expected earnings reports and continued optimism that new leadership in Washington will mean more support for the struggling economy.

The S&P 500 was 1.1 per cent higher at 3,842.03 in morning trading, topping its record closing level of 3,824.68 set earlier this month. The Dow Jones Industrial Average was up 221 points, or 0.7 per cent, at 31,151, as of 10:42 am Eastern time, and the Nasdaq composite was 1.8 per cent higher.

Joe Biden will take the oath of office to become U.S. president later in the day, and he has a flurry of executive actions at the ready. He has also pitched a plan to pump USD 1.9 trillion more into the struggling economy, hoping to act quickly as his Democratic party takes control of the White House and both houses of Congress.

The hope on Wall Street is that such stimulus will help carry the economy until later this year, when more widespread COVID-19 vaccinations get daily life closer to normal. Such hopes have helped stocks and Treasury yields rise, even as the worsening pandemic digs a deeper hole for the economy. Spiraling coronavirus counts and deaths have more workers applying for unemployment benefits and shoppers feeling less confident.

The incoming Biden administration is taking control of the White House from Donald Trump, who pointed again on Wednesday to the stock market's level as validation of his work.

Trump's preferred measure is often the Dow Jones Industrial Average, even though the S&P 500 is much more important to most workers' 401(k) accounts. Under Trump, the Dow had an a annualized return of 11.8 per cent from his inauguration until his last day in office, according to Ryan Detrick, chief market strategist for LPL Financial.

That's better than any Republican president since Calvin Coolidge during the roaring 1920s, but it's not as good as the returns for Bill Clinton or Barack Obama.

Trump has said in the past that he should get credit for the stock market's gains following his election but before his inauguration. The market got a “Trump bump” then on anticipation of lower tax rates, less regulation on companies and faster economic growth. Much of that did come to fruition, but the COVID-19 pandemic and the government's response to it upended everything in 2020.

Gains for stocks have also been accelerating since Biden's election, before his inauguration, on hopes that he and Congress can deliver more stimulus for the economy. The bump for stocks between the most recent Election Day and Biden's inauguration is bigger than Trump's bump before his inauguration. (AP)

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