Market Snapshot: Dow rises over 500 points on hopes for targeted fiscal stimulus

A face mask is seen in front of the New York Stock Exchange (NYSE) at Wall Street in New York City.

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Stocks rallied Wednesday after President Donald Trump, in a Tuesday evening tweetstorm, signaled 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.

What are benchmarks doing?

The Dow Jones Industrial Average DJIA, +1.95% rose 555 points, or 2%, to about 28,328, while the S&P 500 SPX, +1.77% was up 62 points, or 1.8%, at 3,423. The Nasdaq Composite COMP, +1.86% gained 216 points, or 1.9%, at 11,371. The small-cap Russell 2000 RUT, +1.98% outperformed, gaining 1.7%.

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.

“When we look at this, we have a pivot point,” said Matt Lloyd, chief investment strategist at Advisors Asset Management, in an interview. “Right now it’s political. It’s stimulus.”

But Lloyd also said investors already have placed a large amount of cash and Treasurys on the sidelines, and are waiting out the expected tumult around November’s election.

“Even on days like this, where there are visceral moves in the market, most people are sitting on the sidelines in cash,” he said.

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.

Trump’s two-hour late evening tweet spree lifted equity futures, but analysts said a path to a another round of fiscal stimulus still appeared unclear.

“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.”

Jeanette Garretty, chief economist at Robertson Stephens, put the move higher Wednesday into a broader context about the reshaping of the economy by the coronavirus in the year ahead.

“We’ve spent so many months thinking, will we survive this, physically and economically,” she 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.

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, +2.70%, Apple Inc. AAPL, +1.90%, Facebook Inc. FB, -0.10% and Google parent Alphabet Inc. GOOG, +0.46% GOOGL, +0.44%. 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.

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 stimulus, they expected the recovery to slow more than anticipated.

Which companies are in focus?
What are other assets doing?

The yield on the 10-year Treasury note TMUBMUSD10Y, 0.780% rose 4.7 basis points to 0.79% 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, -1.00% falling 1% to $1,889.80 an ounce on Comex. Oil futures pulled back after gains from earlier in the week as traders gauged rising inventory, pushing the U.S. benchmark CL.1, -1.69% down 3.1%.

The greenback was 0.1% lower at 93.61, based on the ICE U.S. Dollar Index DXY, -0.03%.

William Watts contributed reporting

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