Stocks rose slightly on Wednesday as traders weighed the apparent progress in the U.S. fiscal stimulus talks, continuing support from the Federal Reserve and disappointing economic data.
The S&P 500 traded 0.3% higher, and the Nasdaq Composite gained 0.5%. The Dow Jones Industrial Average lagged, falling 15 points, or less than 0.1%.
Congressional leaders closed in on a $900 billion rescue deal that would include a new round of direct payments to consumers. However, that package would exclude a liability shield for businesses and state and local aid, CNBC has confirmed. Politico first reported the news.
The news came after House Speaker Nancy Pelosi, Senate Majority Leader Mitch McConnell, Senate Minority Leader Chuck Schumer and House Minority Leader Kevin McCarthy met Tuesday to strike a bipartisan aid deal. Treasury Secretary Steven Mnuchin called into the talks.
“I’m optimistic that we’re going to be able to complete an understanding sometime soon,” McConnell said Tuesday night after the meeting.
Schumer said the leaders are “making progress, and hopefully we can come to an agreement soon.”
“Stimulus remains a key focus for the market, as it is the necessary bridge to expansive vaccinations,” Lindsey Bell, chief investment strategist for Ally Invest, told clients. “Market participants would like to see a deal sooner rather than later given the expectation for economic data to slow near-term. In the absence of a deal, turbulence could pick up.”
The deadline on stimulus looms amid some of the darkest days of the pandemic. The U.S. is recording at least 215,400 new Covid-19 cases and at least 2,300 virus-related deaths each day, based on a seven-day average calculated by CNBC using Johns Hopkins University data.
Traders also pored over the latest policy announcement from the Federal Reserve.
Fed to keep buying bonds
On Wednesday, the U.S. central bank said it will buy at least $120 billion of bonds each month “until substantial further progress has been made toward the Committee’s maximum employment and price stability goals.” However, the Fed declined to make any changes to the duration of its bond-buying program.
The Fed also upgraded its 2020 GDP projection to a decline of 2.4% from negative 3.7% outlook issued in September. The also raised its forecast for 2021 and 2022 GDP growth.
Both the S&P 500 and Nasdaq hit their session highs following the Fed’s announcement.
However, sentiment was kept in check by a steeper-than-expected drop in U.S. retail sales. The Commerce Department said retail sales fell by 1.1% in November. Economists polled by Dow Jones expected a decline of 0.3%.
“Bottom line, expect a cut to Q4 GDP forecasts after the disappointing sales data,” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group. “Now that we are on the cusp of handing out more money, that should help in coming months but if things aren’t open, not by much except online.”
Wall Street was coming off a strong session in which the major averages all gained more than 1%.
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— CNBC’s Jacob Pramuk contributed to this report.
