U.S. stock benchmarks finished with modest gains in Thursday’s session as investors followed the fitful attempts by lawmakers to pass another fiscal stimulus package in Congress against the background of a slowing economic recovery from the coronavirus pandemic.
How are equity benchmarks doing?
The Dow Jones Industrial Average DJIA, +0.12% rose by 35.2 points, or 0.1%, to end at 27,816.90, off its intraday peak at 28,041.46, while the S&P 500 index SPX, +0.52% climbed 17.8 points, or 0.5%, to 3,380.8. The Nasdaq Composite Index COMP, +1.42% gained 159 points to finish at 11,326.51, leaving it up 1.4%.
On Wednesday, the Dow rose 329.04 points, or 1.2%, to close at 27,781.70, while the S&P 500 index gained 27.53 points, 0.8%, to end at 3,363. The Nasdaq finished 0.7%, or 82.26 points higher, at 11,167.51.
What’s driving the market?
A fresh round of fiscal stimulus is the key driver for markets this week, even if the likelihood of a deal being struck looks increasingly unlikely. Investors say without an agreement, consumers will curb their spending and hold back the progress of the economic recovery.
“Ultimately, it all boils down to consumption. And markets feel, more and more, that the CARES Act 2 is necessary to support consumption. So getting this next fiscal phase is key. Still, we know it’s coming – whether now or after the election – we will get more fiscal support,” said Esty Desk, head of global macro strategy for Natixis Investment Managers, in e-mailed comments.
Market participants are clinging to the prospect of another package of aid after failed talks on Wednesday, gave way to new discussions on Thursday.
Investors were hoping that a delay on Wednesday by the House on a vote on the Democrats $2.2 trillion rescue package might mean progress is still possible. But House Speaker Nancy Pelosi cast doubt on the prospect of a deal. And White House Press Secretary Kayleigh McEnany said Pelosi’s approach to negotiations was not “serious.”
Goldman Sachs analysts in a recent report called the prospect of a new round of fiscal stimulus before the year’s end “unlikely” and said that if House Democrats take a vote on a package and fail, then that would signal the end of negotiations with the White House.
In economic reports, the number of Americans who applied for unemployment benefits fell slightly in mid-September to the lowest level since the start of the coronavirus pandemic, though remaining at a level that underscores the need for another government rescue package for businesses and households.
Initial jobless claims filed through state programs dropped to 837,000 in the week ended Sept. 26 from a revised 873,000 in the prior week. Economists polled by MarketWatch had forecast new claims to fall to 840,000.
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Americans ratcheted up their spending in August for the fourth month in a row, helped by fiscal stimulus measures, but the increase was the smallest since the U.S. reopened businesses and pointed to a slower economic recovery. Worryingly, personal income declined by 2.7% as government benefits declined, underscoring the need for further spending, said analysts.
“If [stimulus] doesn’t come to pass soon then the continual hit to consumer spending will be large and slow down any recovery dramatically,” said Charles Hepworth, an investment director at GAM.
The Institute of Supply Management’s manufacturing index slipped to 54.6% in September from a 21-month high of 56% in the prior month. A reading of 50 or above indicates improving conditions.
Although the data fell below average economists’ estimates for 56.5 surveyed by MarketWatch, it showed expansion for a fifth month in a row as factories coped with the coronavirus and brought back more workers, a good sign for a U.S. economy still recovering from the worst pandemic in a century.
Which stocks were in focus?
- PepsiCo Inc. shares PEP, +1.58% rose 1.6% Thursday, after the drinks and snacks company beat earnings estimates for the third quarter.
- JetBlue Airways Corp. shares JBLU, +1.14% inched 1.2% higher, after the carrier said the U.S. Treasury has agreed to extend loans of up to $1.14 billion until March 26, under the Cares Act.
- Shares of Bed Bath & Beyond BBY, +2.51% surged 25.1% after better-than-expected quarterly results.
- Shares of General Motors Co. GM, +2.67% were up 2.7% after the carmaker said there were “signs of recovery” in the auto industry and highlighted its September sales.
How are other markets faring?
The 10-year Treasury note yield TMUBMUSD10Y, 0.678% was steady at 0.68%. Bond prices move inversely to yields.
U.S. benchmark crude futures for November delivery CL.1, -0.83% fell $1.50, or 3.7%, to settle at a two-week low of $38.72 a barrel on the New York Mercantile Exchange, amid concerns about rising case counts. Gold futures GCZ20, +0.83% gained $20.90, or 1.1%, to settle at $1908.40 an ounce, retaking the key $1,900 level.
In global equities, the Stoxx Europe 600 index SXXP, +0.19% closed 0.2% higher, while the U.K.’s FTSE 100 UKX, +0.22% also gained about 0.2%.
The ICE U.S. Dollar index DXY, 0.06%, a gauge of the greenback’s strength against a basket of currency trading partners, edged down 0.2%.
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