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Dow rallies to close up 410 points on stimulus package hopes

STOCK-MARKET
Getty Images via CNN
A man walks near the New York Stock Exchange (NYSE) at Wall Street in New York City.

NEW YORK, NY -- The stock market rallied on Monday, ignoring negative headlines that weighed on the market over the past few weeks in favor of hoping for a stimulus deal out of Washington.

The S&P 500 rose 53.14 points to 3,351.60. The Dow Jones Industrial Average gained 410.10 points, or 1.5%, to 27,584.06. The Nasdaq composite climbed 203.96 points, or 1.9%, to 11,117.53. Traders also bid up smaller company stocks, sending the Russell 2000 small-cap index up 35.43 points, or 2.4%, to 1,510.34.

The market’s gains were widespread, with more than 90% of the stocks in the S&P 500 higher. Big Tech stocks, which have been getting the most criticism for getting too expensive following their strong pandemic run, did the heaviest lifting. Several companies announced big mergers and acquisitions, which also helped to push markets higher.

Optimism that Democrats and Republicans in Congress will reach a deal on another coronavirus relief bill helped put investors in a buying mood, said Nela Richardson, investment strategist at Edward Jones.

“There’s real concern about a second wave of infections, concern that we’re just riding the coattails of growth that happened after the economy opened up in May,” Richardson said. “Anything that looks like new lifeblood for the economy is read as a positive stimulus.”

U.S. House Speaker Nancy Pelosi told CNN that House Democrats may offer their latest stimulus proposal as legislation if revived talks with the Trump administration do not yield a deal her party can get behind.

Yet even as investors are feeling good about a possible deal, economists are a bit more pessimistic. Morgan Stanley became the latest bank to downgrade its growth outlook because of the slimming chance of another stimulus bill this year.

The approaching end of the month might be another reason stocks are higher. After a bad month in the market, investors almost always have a need to buy some stocks at the end of it unless they decide they want to be less invested than before, said Sebastien Galy, senior macro strategist at Nordea. After Monday, there are only two trading days left in September.

But this doesn’t mean the worries that pushed stocks lower in the past weeks are gone.

In fact, not that much has changed from last week, and volatility remains high. The CBOE Volatility Index, or VIX, is slightly higher on Monday and remains in elevated territory even though it has come down from the panic-fueled levels it has hit earlier this year.

The impending election, uncertainty about the future path of Covid-19, worries about rising infections in the winter and a slowdown of the economic recovery have been weighing on the market for weeks.

The week ahead will also be particularly busy with economic data and political events.

President Donald Trump and Democratic presidential candidate Joe Biden are facing off in the first of three debates on Tuesday, and the September jobs report — the last look at the employment situation before the election — comes out on Friday. Economists predict 850,000 jobs were added to the U.S. economy in September, a sharp slowdown from the 1.4 million added in August. The unemployment rate is expected at 8.2%, marginally lower than in the prior month.

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Comments

7 Comments

  1. Don’t count your chickens before they hatch. Pelosi and the Democrats will squash any attempt to pass a stimulus package that doesn’t include huge amounts of port for their constituents!

  2. Millions upon millions for the cities that burned for three months while the leaders stood bye or hid? NO money for you!! You had the opportunity to stop the violence with the Federal Governments help but no, you hate our President enough to risk your constituents life you should all go to hell oops never mind you already do

  3. The DOW has no connection to the vast majority of US citizens who have lost their jobs because of the criminal malfeasance in office related to the orange buffoon’s failed handling of the pandemic.

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