A face mask is seen in front of the New York Stock Exchange (NYSE) at Wall Street in New York City.
AFP via Getty Images
Stocks finished higher Wednesday after President Donald Trump signaled late Tuesday that he was open to a number of separate fiscal stimulus measures, only hours after calling off talks with congressional Democrats on a relief package until after the November election.
At the same time, investors said they were looking past the current legislative wrangling in Washington, eyeing the year ahead when the passage of a stimulus package to support the economic recovery and a working vaccine was more likely.
What are benchmarks doing?
The Dow Jones Industrial Average DJIA, +1.91% rose 530.7 points, or 1.9%, to 28,303.46, while the S&P 500 SPX, +1.74% was up 58.5 points, or 1.7%, to finish at 3,419.45. The Nasdaq Composite COMP, +1.88% gained 210 points, or 1.9%, at 11,364.60. The small-cap Russell 2000 RUT, +2.14% outperformed, gaining 2.2%.
The Dow on Tuesday reversed a gain of more than 200 points to end the day with a loss of 375.88 points, or 1.3%, at 27,772.76, after Trump, in an afternoon tweet, said he told negotiators to halt stimulus talks with Democrats until after the election.
The S&P 500 fell 47.66 points, or 1.4%, to finish at 3,360.97, while the Nasdaq Composite closed at 11,154.60, down 177.88 points, or 1.6%.
What’s driving the market?
Stocks found some buying momentum on Wednesday, during a chaotic week punctuated by mixed messages out of Washington on the status of fiscal stimulus talks.
A little more than an hour before Tuesday’s market close, Trump in a tweet accused congressional Democrats of negotiating in bad faith and announced that he had pulled the plug on stimulus talks until after the election.
Hours later, however, in another flurry of tweets, Trump said that he would immediately sign individual stimulus measures, if sent to him, including a round of $1,200 individual stimulus checks and a package of $25 billion in airline payroll support and $135 billion for the Paycheck Protection Program for small businesses which he said could be paid for out of unused funds from the Cares Act.
See: Mnuchin and Pelosi resume discussions after Trump changes course on fiscal stimulus
Trump’s two-hour late evening tweet spree lifted equities, but analysts said a path to a another round of fiscal stimulus still appeared unclear.
Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi talked on Wednesday morning, with Pelosi saying she was open to relief for airlines but not the stimulus checks proposal.
“Markets had become resigned to the fact that we weren’t getting anything,” said Will Geisdorf, senior research analyst with Sarasota, Florida-based Allegiant Private Advisors. He attributed the positive tone for stocks over roughly the past week to hopes that talks between the White House and congressional Democrats had became more serious.
“Wall Street is not Main Street,” Geisdorf said in an interview. “Main Street is in a much worse position if we see the next stimulus pushed off, because a lot of companies will need to make another round of job cuts.”
But even as the prospects of a stimulus package this year look increasingly rocky, the expectation is that either Trump or Democratic presidential candidate Joe Biden would unroll aggressive stimulus measures in 2021.
“We’ve spent so many months thinking, will we survive this, physically and economically,” Jeanette Garretty, chief economist at Robertson Stephen, told MarketWatch. “But now, it’s about what is the character of the economy going to look like in 2021.”
Garretty remains hopeful about the prospects for a COVID-19 vaccine and improved treatments for the virus, but also sees the pandemic creating 1980s-style disruptions to the labor market as businesses change the way they operate.
“People are beginning to pick up signals that business, no matter what, are going to be different,” she said.
Minutes of the Federal Reserve’s September policy meeting showed senior Fed officials thought the U.S. economy was recovering faster than expected, but many had penciled in another stimulus package before the end of this year. Without additional spending, Fed officials expected the recovery to slow more than anticipated.
Technology stocks also were in focus Wednesday after the House Judiciary Antitrust, Commercial and Administrative Law Subcommittee late Tuesday issued a highly critical report on the business practices of industry juggernauts Amazon.com Inc. AMZN, +3.08%, Apple Inc. AAPL, +1.69%, Facebook Inc. FB, -0.20% and Google parent Alphabet Inc. GOOG, +0.47% GOOGL, +0.56%.
The report concluded that big tech firms pose a threat to markets that might require breaking up the most prominent U.S. tech companies and limiting their acquisitions.
Which companies are in focus?
- Airline stocks were on the rise, with the industry-tracking U.S. Global Jets ETF JETS, +2.79% up 2.8% after Trump’s call for a stand-alone aid package.
- DraftKings Inc. said it has priced a previously announced offering of 32 million shares at $52 a share. The company is selling 16 million shares, while shareholders are selling another 16 million, for a total offering size of $1.664 billion. DraftKings will not receive any of the proceeds from the shares being offered by selling shareholders. Shares DKNG, -6.07% fell 5.4%.
- Amazon.com Inc. AMZN, +3.08% shares were 3.1% higher after a price target upgrade, to $3,800.
- Sunworks Inc. SUNW, +45.00% shares surged nearly 45% after the solar power systems provider reported stronger-than-expected bookings.
What are other assets doing?
The yield on the 10-year Treasury note TMUBMUSD10Y, 0.790% climbd 4.3 basis points to a four-month high of 0.784% after Trump’s reversal on stimulus. Yields and bond prices move in opposite directions.
In global equities, Hong Kong’s Hang Seng Index HSI, +1.09% rose 1.1%, while Japan’s Nikkei 225 NIK, -0.04% closed fractionally lower. The pan-European Stoxx 600 Europe SXXP, -0.11% was 0.1% lower, and London’s FTSE 100 UKX, -0.06% was up 0.1%.
Gold slid, with the December contract GCZ20, -0.97% dropping $18, or 0.9%, to settle at $1,890.80 an ounce on Comex, its lowest since Sept. 28. Oil futures pulled back after gains from earlier in the week as traders gauged rising inventory, pushing the U.S. benchmark CL.1, -1.67% down 72 cents per barrel, or 1.8%, to settle at $39.95 a barrel.
The greenback was 0.1% lower at 93.61, based on the ICE U.S. Dollar Index DXY, -0.04%.
William Watts and Andrea Riquier contributed reporting
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