Stocks rose sharply on Tuesday as traders grew more optimistic about Congress passing another economic relief package.
The Dow Jones Industrial Average gained 320 points, or 1.1%. The S&P 500 advanced 1.2%, and the Nasdaq Composite climbed 1.0%.
Apple led the Dow higher, rising 4.8%, after Nikkei reported the company will increase iPhone production by about 30% in the first half of 2021. Eight of the 11 S&P 500 sectors were up more than 1%, including tech, energy, financials and industrials.
House Speaker Nancy Pelosi invited congressional leaders, including Senate Majority Mitch McConnell, to discuss government funding and coronavirus relief, a source told CNBC. Pelosi’s outreach came after a bipartisan group of lawmakers released a proposal for another round of economic relief on Monday evening, splitting a previous measure into two parts.
The new plan calls for $748 billion in spending for programs that are popular on both sides of the aisle, including an additional $300 per week in federal unemployment benefits and another $300 billion for more loans under the Paycheck Protection Program.
A second $160 billion bill would include the more contentious areas of business liability protections and financial aid to state and local governments.
“There’s been a tug of war between the vaccine news and the virus news. The only tiebreaker that’s kept the averages on their way higher seems to be the potential for getting stimulus out of gridlock,” said Art Hogan, chief market strategist at National Securities. “It certainly feels like one of the proposals that’s on the table … can go through.”
The latest step toward a stimulus deal comes as investors and Americans at large grapple with a bleak near-term outlook but prospects of economic growth and a possible end of the pandemic in 2021.
The first round of shots from the vaccine developed by Pfizer and BioNTech were given in the U.S. on Monday, but the country also passed 300,000 deaths from Covid-19, according to data from Johns Hopkins University. New York City Mayor Bill de Blasio also warned residents that a full shutdown may be needed to protect the city’s hospitals.
Luke Tilley, chief economist at Wilmington Trust, said that another stimulus package was needed to keep the economic recovery from stalling before the vaccine can be distributed.
“With the continued rising cases and mass vaccinations still a ways out, we could see some further weakness in jobs and even a flattening where we’re not even adding jobs at all … that’s absolutely a possibility for this next jobs report,” Tilley said. “And if we were to not get another stimulus package, you’re going to have 10 to 11 million people fall off the unemployment rolls right away, and that would hit spending as well.”
On Tuesday morning, the Food and Drug Administration said the data on Moderna’s coronavirus vaccine met expectations for emergency use, a crucial step before a full approval. If the FDA greenlights the vaccine, it would be the second approved for use in the U.S. behind Pfizer’s. Shares of Moderna dipped 5%.
The move in stocks follows a mixed session on Monday where the tech-heavy Nasdaq Composite and the small-cap Russell 2000 rose while the S&P 500 and Dow fell. The 0.4% decline for the S&P 500 was its fourth-straight negative day.
Even with recent weakness for the S&P 500 and Dow, the three major indexes are trading near record highs and are up for the year. David Waddell, chief investment strategist at wealth advisory firm Waddell and Associates, said that may moderate what is typically a bullish seasonal trend for stocks.
“We may have already gotten a little bit of a Santa Claus rally,” Waddell said. “So normally the markets would accelerate from here into year-end, and they may again, but the run has been such a strong one, I wouldn’t be surprised, and actually I’d rather, if the market consolidated its gains a little bit.”
— CNBC’s Yun Li contributed reporting.
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