28 October 2020

Stocks Rise as Trump Appears to Soften Stance on Stimulus

Share This Story

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 said.

“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 small businesses.

“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 3.3%.

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 coronavirus.

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.

Click here for the original article.

Join Our Online Community
Join the Better Way To Retire community and get access to applications, relevant research, groups and blogs. Let us help you Retire Better™
FamilyWealth Social News
Follow Us