Stocks trimmed gains Thursday after House Speaker Nancy Pelosi rejected the idea of a standalone bill to aid the airline industry, saying such a measure would need to be part of a broader fiscal stimulus package.
Corporate deals in the technology and financial sectors also added to investor confidence, taking the benchmark indices to five week highs.
What are major benchmarks doing?
The Dow Jones Industrial Average DJIA, +0.31% was up 94.81 points, or 0.3%, at 28,398.27, while the S&P 500 SPX, +0.71% rose 0.7% to trade at 3,444.09. The Nasdaq Composite COMP, +0.45% added 0.5%, to 11,419.65.
The Dow on Wednesday finished with a gain of 530.70 points, or 1.9%, at 28,303.46, while the S&P 500 advanced 58.49 points, or 1.7%, to close at 3,419.44. The Nasdaq Composite rose 210 points, or 1.9%, finishing at 11,364.60. The Dow had its best day since July on Wednesday.
What’s driving the market?
U.S. Treasury Secretary Steven Mnuchin and Pelosi, D-California, resumed talks Wednesday after President Donald Trump tweeted the previous evening that he was open to piecemeal fiscal stimulus measures, including aid for airline workers. Earlier Trump had announced he had scrapped talks with congressional Democrats over another financial-aid package to help support the economic recovery in the wake of the coronavirus pandemic.
On Thursday Pelosi said she wouldn’t back a standalone package for the airline without a broader stimulus bill. “There is no stand-alone bill without a bigger bill. There is no bill,” Pelosi told reporters at her weekly press conference at the U.S. Capitol.
“It’s likely that there will continue to be near-term volatility due to the
back-and-forth over a deal, the U.S. elections, U.S.-China tensions, vaccine
developments, and increasing mobility restrictions due to rising COVID-19 cases in Europe,” said Mark Haefele, chief investment officer at UBS Global Wealth Management, in a note.
“But we do maintain a positive medium-term view for stocks into the middle of next year,” he said. “A stimulus deal will be struck eventually, central banks will continue to stay supportive, and medical developments still have scope to surprise, in our view.”
Some analysts have argued that optimism is centered more on the potential for a more sweeping package in January after the elections. Also, fears of a contested election, which could leave the outcome of the contest in doubt for weeks, have faded as polls show Democratic challenger Joe Biden increasing his lead over Trump, analysts said.
While a Biden administration would aim to repeal Trump’s corporate tax cuts and increase regulation across a number of industries, the potential for a drawn-out and divisive post-election fight has been viewed as a worst case scenario by many investors.
“Our base case is a Biden win and Democrats sweeping Congress. In this scenario, the Democrats pursue a net fiscal stimulus that combines tax hikes with an elaborate spending plan on energy and climate change management,” wrote analysts at Credit Suisse, in a note.
A vice presidential debate Wednesday night was viewed as a much more civil affair than last week’s clash between Trump and Biden, but appeared unlikely to change the election dynamic, analysts said.
Meanwhile, initial jobless claims filed through state programs slid to 840,000 in the week ended Oct. 3 from a revised 849,000 in the prior week, the Labor Department reported. Economists polled by MarketWatch had forecast new claims to fall to 820,000.
The slowing decline of the number of Americans who applied for jobless benefits could be a sign the labor market is experiencing a setback amid another wave of corporate layoffs.
Which companies are in focus?
- The airline-industry-tracking U.S. Global JETS ETF JETS, +1.27% trimmed an earlier rise, but remained up 1.1%. Hopes for aid have lifted the index 2.5% so far this week.
- Shares of International Business Machines Corp. IBM, +5.35% rose 5.5% after the technology company said it would separate its managed infrastructure services unit of its Global Technology Services division into a new public company.
- Morgan Stanley MS, +0.31% said Thursday it has agreed to acquire asset manager Eaton Vance Corp. EV, +47.65% in a cash-and-stock deal with an equity value of about $7 billion. Eaton Vance shares jumped 48%, while Morgan Stanley shares were up 0.6%
- Regeneron Pharmaceuticals Inc. REGN, +2.36% shares were up 1.8% after Trump praised an experimental antibody cocktail made by the company which is still in clinical trials. Trump was administered the combination when he was hospitalized for COVID-19.
- Shares of McDonald’s Corp. MCD, -0.20% were off 0.1% after the fast-food giant reported third-quarter same-store sales that beat forecasts and said it was raising its dividend by 3%.
How are other markets trading?
Gold futures GOLD, +1.46% attempted a rebound, rising 0.3% to settle at $1888.60 an ounce. In oil, U.S. crude futures CL.1, +3.07% gained $1.24 per barrel, or 3.1%, to settle at a more than four-week high of $41.19 a barrel, boosted by worries over the near-term supply outlook amid a widening strike in Norway and as Hurricane Delta closes down production in the Gulf of Mexico.
The ICE U.S. Dollar Index, a measure of the currency against a basket of six major rivals, was virtually flat.