U.S. stocks climbed Wednesday after President Trump appeared
to soften his stance on a further stimulus package for American households,
airlines and small businesses.
The Dow Jones Industrial Average rose 556 points, or 2%, and
the S&P 500 gained 1.8%. The Nasdaq Composite was up 1.9%, a day after a
Democratic-led House panel argued Congress should break up the largest tech
companies on antitrust grounds.
President Trump’s fusillade of tweets whipsawed the market,
but investors have begun to expect a Democratic victory in November, and more
stimulus spending after that, said Oanda analyst Edward Moya. That belief,
along with faith in the Federal Reserve, will likely help stem any selloffs, he
“There’s not much that’s really going to change everyone’s
medium and longer-term game plan for this market,” he said.
Still, the short term can still be frenetic. Stocks fell
sharply Tuesday after Mr. Trump dashed hopes for a new economic relief package
before the November election: He tweeted that he had told his representatives
to end negotiations with Democrats over the coronavirus-aid spending.
Just hours later, the president seemed set to shift course.
He said in a series of overnight tweets that he was “ready to sign right now”
if he was sent a stand-alone bill for sending $1,200 checks to Americans. He
also urged lawmakers to approve a $25 billion package to support airlines’
payrolls and $135 billion for the Paycheck Protection Program, aimed at helping
“Walking back from the earlier tweet was pretty notable,”
said James McCormick, a strategist at NatWest Markets. “It has people thinking
he’ll do some targeted stimulus.”
Shares of airlines rose following Mr. Trump’s tweets. United
Airlines rose 4.3%, American Airlines rose 4.5% and Delta Air Lines gained
Tech companies wobbled after the House Antitrust
Subcommittee released a report arguing that companies like Apple, Amazon and
Alphabet have used their dominance to stifle competition. The report isn’t
expected to lead to any immediate actions, but could color how a new government
in Washington approaches the sector after the election.
Apple rose 1.9% and Amazon gained 2.6%. After falling early,
Alphabet added 0.7% and Facebook inched up 0.1%.
In other trading, shares of Eli Lilly rose 3.9% after it
said it requested U.S. authorization of a Covid-19 antibody drug following
positive results from clinical testing.
Investors for some weeks have been skeptical that Democrats,
the White House and Republicans would be able to bridge their differences over
a broad fiscal spending plan before Nov. 3. Many are continuing to wager that
the next sweeping round of stimulus will be forthcoming only in the new year,
if there is a decisive electoral victory for one of the two major parties.
“The market’s base case is that we’re going to get some
stimulus postelection,” said Michael Bell, a global market strategist at J.P.
Morgan Asset Management. “In many ways, a clear election result which leads to
some stimulus—whether it’s Republican-led or Democrat-led—is better than an
unclear result which leads to continued lack of stimulus.”
Investors, meanwhile, are likely to look ahead to the first
vice presidential debate, scheduled to start at 9 p.m. ET, for further cues on
how the election may play out. Polls so far have indicated that Democratic
nominee Joe Biden has a widening lead over Mr. Trump following the first debate
between the candidates, but that was before the president disclosed that he has
Mr. Trump’s illness has added to the confusion and
uncertainty in the home stretch of the 2020 campaign, raising questions about
the Senate’s ability to proceed with a contentious Supreme Court confirmation
process and new bills for government aid to businesses.
On Tuesday, Federal Reserve Chairman Jerome Powell warned of
potentially tragic economic consequences if additional support isn’t provided
to businesses and households.
Both Congress and the Federal Reserve are pumping trillions
of dollars into the economy to fight the economic damage caused by the
coronavirus. WSJ explains where all that stimulus money is coming from. Photo
Illustration: Carlos Waters / WSJ
All of that has led some investors to make investments based
on what they expect to happen in and after the election, but much of that has
been driven by fear, said Katerina Simonetti, senior vice president at Morgan
Stanley Private Wealth Management, and that’s a mistake.
“We tell our clients, ‘Vote at the polls not with your
portfolios,’” she said. ”Once we know the outcome, that will be the time to
truly sit down and take a forward-looking approach.”
Investors got a look inside Fed policy makers’
deliberations, with the release of the minutes from the September meeting. It
showed Fed officials agreed on raising the bar on when the bank would start
raising interest rates, but disagreed on the best way to support the economy
with its actions.
The central bank has been buying about $120 billion worth of
securities since mid-June.
“While they can still amp up their existing purchases, there
is very little they can do from here otherwise,” said Peter Boockvar, chief
investment officer at Bleakley Advisory Group.
The yield on the 10-year Treasury edged up to 0.785%.
Expectations that interest rates will be kept low have left U.S.
government-bond yields rangebound in recent weeks. But the yield closed at 0.760%—its
highest level since June—on Monday, lifted by mounting hopes for a new fiscal
stimulus deal, before settling down at 0.741% Tuesday.
Overseas, the pan-continental Stoxx Europe 600 fell 0.1%.
In Asia, Japan’s Nikkei 225 was largely flat, while Hong
Kong’s Hang Seng Index climbed 1.1%. Chinese markets on the mainland remained
closed for a holiday.
—Paul Vigna and Jem Bartholomew contributed to this article.
here for the original article.