Dow closes up 530 points on hopes of targeted stimulus
Wall Street’s main indexes all finished strongly in positive territory on Wednesday after President Donald Trump did a partial U-turn on stimulus talks and urged Congress to pass targeted pandemic relief aid immediately.
The Dow Jones Industrial Average finished up 530.70 points or 1.91 percent to finish at 28,303.46.
The S&P 500 – a gauge for the health of US retirement and college savings reports – closed up 1.76 percent, while the tech-heavy Nasdaq Composite Index finished 1.88 percent to the plus side.
President Trump said, in a series of tweets on Tuesday, that he had instructed his representatives to halt talks with Democrats in Congress over a new round of pandemic relief aid until after the November 3 election.
But hours later, he tweeted that he was ready to sign a stand-alone bill that would send a new round of $1,200 direct cash payments to struggling Americans. He also urged Democrats in Congress to approve more help for small businesses, and approve $25bn in payroll aid for the nation’s airlines.
If I am sent a Stand Alone Bill for Stimulus Checks ($1,200), they will go out to our great people IMMEDIATELY. I am ready to sign right now. Are you listening Nancy? @MarkMeadows @senatemajldr @kevinomccarthy @SpeakerPelosi @SenSchumer
— Donald J. Trump (@realDonaldTrump) October 7, 2020
On Wednesday, hopes mounted for an airline bill after House Speaker Nancy Pelosi and US Treasury Secretary Stephen Mnuchin discussed the possibility of a standalone lifeline for airlines.
Shares of major US carriers rallied on the news to finish strongly in positive territory.
While the prospect of targeted aid clearly lifted investor spirits on Wednesday, some analysts were sceptical about the impact it could have.
“A piecemeal approach might allow for only a very limited amount of fiscal relief,” Alec Phillips, an analyst at Goldman Sachs, wrote in a Wednesday note.
Trump announced he was halting stimulus talks just hours after Federal Reserve Chairman Jerome Powell on Tuesday warned that the US economic recovery is in danger of faltering without more government stimulus.
In a virtual address to the National Association for Business Economics, the Fed chief warned: “Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses.”
The airline industry has been decimated by coronavirus lockdowns and restrictions. Last week, nearly 40,000 airline workers were informed they would be laid off or furloughed.
Airline CEOs have warned that more cuts could come unless they receive government aid.
Small businesses, especially bars, restaurants, and retail, have also been battered by the COVID-19 crisis and months-long shutdowns and are in desperate need of additional aid. As the US heads towards the winter months, more restrictions are likely.