Stock markets on Thursday closed at new highs amid expectations of a strong recovery as President BidenJoe BidenManchin cements key-vote status in 50-50 SenateThe Memo: How the COVID year upended politicsPost-pandemic plans for lawmakers: Chuck E. Cheese, visiting friends, hugging grandkidsMORE signed a $1.9 trillion COVID-19 relief bill into law one day earlier than scheduled.

The Dow Jones Industrial Average closed at a new record of 32,486, up 189 points, or 0.6 percent, while the S&P 500 closed at 3,939, up 41 points, or 1 percent.

Markets have shaken off recent jitters that the massive spending package would lead to inflation. Bond yields that spiked in recent weeks, sparking a selloff, came back to earth, and official inflation figures from the government set traders at ease.

The relief plan is expected to create a surge in demand through stimulus checks and poverty reduction measures, as well as accelerate the vaccine rollout.

But potential downsides remain, as states have begun dropping key COVID-19 restrictions contrary to guidance from the Centers for Disease Control and Prevention.

Those moves could produce a short-term boost in the economy, but also lead to a spike in cases that prolongs the pandemic.