Stocks posted modest gains following Tuesday’s historic rally.
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Topline: Stocks continued to rally somewhat on Wednesday, posting moderate gains following Tuesday’s historic rebound, amid news that the Trump administration has reached an agreement with lawmakers over a massive $2 trillion coronavirus stimulus bill to shore up the economy.
- At Wednesday’s open, the Dow Jones Industrial Average gained 2.8%, nearly 600 points, while the S&P 500 was up 1.7% and the Nasdaq Composite gained 1.5%.
- Overnight futures rallied up to 4.5% in reaction to news of a deal being struck in Congress over the $2 trillion coronavirus relief bill, but later pared back some of those gains.
- The Senate and the White House finally reached an agreement on the massive $2 trillion economic stimulus package early on Wednesday morning, following five days of heated negotiations and two failed votes, as the country continues to grapple with the economic fallout from coronavirus.
- The agreement is the biggest economic rescue package in modern American history—dwarfing the one passed by Congress during the 2008 financial crisis ($700 billion), and both the Senate and House are expected to pass the legislation later in the day.
- Earlier reports that Congress was “very close” to a deal sent the stock market roaring back to life on Tuesday as Wall Street staged a historic comeback from its three-year lows.
- Yesterday the Dow soared more than 2,100 points, or over 11%, for its biggest one-day gain since 1933, while the S&P 500 was up over 9%—its best day since 2008, and the Nasdaq gained more than 8%.
Crucial quote: “With the nation and the world in uncharted territory, elected leaders have now followed the Federal Reserve into “whatever it takes” mode,” says Mark Hamrick, senior economic analyst for Bankrate. “Bipartisan agreement on the so-called Phase 3 measure, unprecedented in cost and scope, is most welcomed and critically important to help businesses and individuals remain solvent.”
What to watch for: “Markets are still searching for equilibrium and trying to figure out when the economy will be able to re-open, and right now there is just about zero clarity on that front,” according to Bespoke Investment Group.
Tangent: To regain confidence in the economy and markets, there are three primary requirements, according to Ron Temple, head of U.S. equity at Lazard Asset Management. Those include effective treatments for COVID-19, fiscal support to sustain the economy while people stay home and monetary stimulus to keep liquidity flowing through the economy. “With today’s legislation we now have two of the three key ingredients to regain that necessary confidence,” he says.