Stocks are marching higher on Wall Street Wednesday after President Donald Trump appeared to backtrack on his decision to halt talks on another rescue effort for the economy.
The S&P 500 was 1.9 per cent higher in afternoon trading after Trump sent a series of tweets late Tuesday saying he's open to sending out US$1,200 (NZ$1824) payments to Americans, as well as limited programs to prop up the airline industry and small businesses.
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The tweets came just hours after Trump sent the market into a sudden tailspin with his declaration that his representatives should halt talks with Democrats on a stimulus effort for the economy until after the election, saying House Speaker Nancy Pelosi had been negotiating in bad faith. The stakes are high, as economists, investors and the chair of the Federal Reserve all say the economy needs another dose of support following the expiration of weekly jobless benefits and other stimulus Congress approved earlier this year.
"What we've seen over the last 24 hours is just confirmation that the market is really addicted to stimulus from the government," said Sal Bruno, chief investment officer at IndexIQ. "When it thinks it's not getting it, it sells off, and when it looks like there's a possibility for that it rises, as we've seen today."
The Dow Jones Industrial Average was up 590 points, or 2.1 per cent, at 28,363, as of 3:23 p.m. Eastern time.
The Nasdaq composite climbed 1.9 per cent, despite a call by Democratic lawmakers for Congress to rein in the Big Tech companies that dominate it and other indexes. The proposal, which follows a 15-month investigation by a House Judiciary Committee panel, could make it harder for Amazon, Apple, Facebook and Google's parent company to acquire others and impose new rules to safeguard competition.
Amazon rose 2.8 per cent, and Apple climbed 1.8 per cent. Google's parent company added 0.5 per cent, and Facebook slipped 0.2 per cent.
But much of the market's attention remains fixed on the prospects for more stimulus for the economy from Washington. Wednesday's gains helped the S&P 500 recoup all of its loss from the day before, when Trump's tweets suddenly sent it from a 0.7 per cent gain to a 1.4 per cent loss.
Just a few hours before Trump made his announcement on Tuesday to halt negotiations, Federal Reserve Chair Jerome Powell had asked Congress to come through with more aid. He said that too little support "would lead to a weak recovery, creating unnecessary hardship."
Some analysts characterised Trump's move as likely a negotiating ploy.
"I do not believe hopes of a stimulus deal are now gone forever," said Jeffrey Halley of trading and research firm Oanda. "One of Mr Trump's favourite negotiating tactics, judging by past actions, is to walk away from the negotiating table abruptly. The intention being to frighten the other side into concessions."
In the longer term, many investors say a big stimulus package may still be possible regardless of what Trump says. A Democratic sweep of the upcoming elections would likely clear the way for a big government program after the transfer of power, and Wall Street has begun to see a blue wave as more likely than before.
Airlines jumped to some of the day's bigger gains after Trump singled out the industry, asking Congress to "IMMEDIATELY" approve $25 billion for them. Last week, Pelosi had told airline executives to halt the furloughs of tens of thousands of workers with the promise that aid for them was imminent, though a proposal by House Democrats to give the airline industry $28.8 billion failed to advance.
United Airlines Holdings rose 4.5 per cent, American Airlines Group climbed 4.6 per cent and Delta Air Lines pulled 3.7 per cent higher.
The S&P 500 rose broadly, with technology stocks making the biggest gains. Other areas that would benefit most from a strengthening economy were also climbing, including retailers and travel-related companies.
"The market's just been relentlessly led by long-duration growth stocks," said Barry Bannister, head of institutional equity strategy at Stifel. "The big question is are we going to see some signs of a shift to economic growth beneficiaries."
Smaller stocks also rose more than the rest of the market, an indication of rising optimism about the economy's prospects. The Russell 2000 index of small-cap stocks climbed 2.1 per cent.
The 360-degree spin for Wall Street in less than 24 hours is just the latest bump in its shaky run since early last month. After plunging nearly 34 per cent early this year on worries about the coronavirus pandemic and the recession it would cause, the S&P 500 rallied back to record heights thanks to tremendous aid from the Federal Reserve and Congress, along with signs of strengthening in the economy.
It's been struggling since setting an all-time high in early September on a range of worries. Besides the clouded prospects for more stimulus from a bitterly divided Congress when parts of the economy have begun to slow, investors are also worried about whether the continuing pandemic will lead governments to put more restrictions on businesses. Tensions between the United States and China are still simmering, and stocks still look too expensive in the eyes of some critics despite their recent pullback.
The economy experienced a sharp rebound shortly after the initial shock from shutdowns, but that recovery is slowing and there may be some lasting damage that will be difficult to overcome.
"What we're seeing now is some lasting damage to personal services, employment prospects and the widening of gaps that feed a political maelstrom that is not good for the future," Bannister said.
The yield on the 10-year Treasury rose to 0.79 per cent from 0.76 per cent late Tuesday. It had slid following Trump's initial tweets, after climbing to its highest level since June.
European and Asian markets ended mixed.
- Associated Press