Stocks Rally 6% As Wall Street Hopes For Progress On Coronavirus Stimulus Bill
Topline: The stock market rallied on Tuesday morning, opening about 6% higher amid renewed optimism that Congress can finally reach an agreement on a $2 trillion fiscal stimulus bill to cushion the economic fallout from the coronavirus pandemic.
- As of 9:50 a.m. on Tuesday morning, the Dow Jones Industrial Average gained 6.6%, over 1,200 points, while the S&P 500 was up 5.8% and the Nasdaq Composite rose 5.2%.
- Overnight stock futures for all three major indexes hit their limit-up levels of 5%, amid reports that both Senate Minority Leader Chuck Schumer (D-Ny.) and Treasury Secretary Steven Mnuchin said late Monday night that Congress was close to reaching a deal on a massive fiscal stimulus bill.
- The $2 trillion coronavirus relief package—one of the biggest pieces of financial legislation ever proposed—has failed votes in the Senate for the last two days in a row, facing opposition from Democrats who criticized the Republican legislation for focusing too much on bailing out companies and not doing enough to help workers.
- Democrats have also taken issue with a $500 billion funding program designated to help distressed businesses, which would be directly under control of the Treasury Secretary—but with little oversight for how that money will be used. When asked, Trump said, “I’ll be the oversight.”
- While details of the bill remain fluid, other proposed measures include direct cash payments of up to $1,200 to struggling Americans and roughly $850 billion in loans to businesses, states and cities.
- As investors continue to nervously await the passage of a coronavirus relief bill, the Federal Reserve is doing all it can to support struggling markets: Earlier on Monday, the central bank committed to an unlimited asset purchase program.
Key background: The market is having its worst month since 1931, falling up to 35% over the last four weeks. That decline, in such a short period of time, is the steepest drop since the Great Depression, according to Bespoke Investment Group. During trading on Monday, stocks slumped after Congress again failed to pass the $2 trillion coronavirus relief package. Both the Dow and S&P 500 hit their lowest levels since December 2016.
What to watch for: House Speaker Nancy Pelosi on Monday introduced a separate, $2.5 trillion economic response bill to deal with the coronavirus—since the one currently being negotiated initially excluded Democrats. This version of the stimulus bill aims to send $1,500 to individual Americans and provides additional funds for measures like unemployment insurance. Pelosi said it “takes responsibility for the health, wages and well-being of America’s workers.”