Dow rises over 200 points as Trump prepares fiscal stimulus counteroffer

U.S. stocks rose Friday as investors remained optimistic over prospects for another round of fiscal stimulus from Congress, with major benchmarks on track for their best week since August.

The Dow Jones Industrial Average

rose 236.76 points, or 0.8%, to 28,662.27, while the S&P 500

advanced 33.74 points, or 1%, to 3,480.57. The Nasdaq Composite

gained 139.29 points, or 1.2%, to trade at 11,560.27.

The Dow on Thursday rose 122.05 points, or 0.4%, to finish at 28,425.51, while the S&P 500 advanced 27.38 points, or 0.8%, to close at 3,446.83. The Nasdaq Composite finished at 11,420.98, up 56.38 points, or 0.5%.

Through Thursday, the Dow was on track for a 2.7% weekly gain, while the S&P 500 was up 2.9% and the Nasdaq was up 3.1%. That would be the strongest weekly rise for the Dow since Aug. 7 and the strongest for the S&P 500 and Nasdaq since Aug. 28, according to FactSet.

What’s driving the market?

Investors remain optimistic about another fiscal stimulus package being passed by Congress eventually and stocks advanced Thursday encouraged by continued talks between House Democrats and the Trump administration.

Gains were extended modestly Friday after White House economic adviser Larry Kudlow said President Donald Trump had approved a revised stimulus package. The Wall Street Journal’s Kate Davidson tweeted that sources said Treasury Secretary Steven Mnuchin would present House Speaker Nancy Pelosi, D-California, with a $1.8 trillion counteroffer to the Democrats’ $2.2 trillion plan when they speak Friday:

“Investors have clearly been sensitive to the on/off fiscal stimulus talks, as U.S. equities appear primarily driven by expectations surrounding the outcome of these intense discussions,” said Han Tan, market analyst at FXTM, in a note.

While news reports signaled that Trump has moved back in favor of a wide-ranging stimulus package, stocks briefly trimmed gains in morning action after Senate Majority Leader Mitch McConnell, R-Kentucky, called prospects for a deal before the election “unlikely.”

Pelosi on Thursday rejected calls for stand-alone aid for airlines, saying any relief must be part of a broader package, but talks continued, with Pelosi and Treasury Secretary Steven Mnuchin holding further discussions. A Pelosi spokesman tweeted that Mnuchin had signaled the administration was now again open to a comprehensive package.

Stocks had taken a tumble on Tuesday after President Donald Trump announced he had ended talks on a stimulus package until after the election, but a few hours later he changed course to call for action on piecemeal stimulus efforts, and now wants a broader package again. Senate Republicans remain hesitant to increase the fiscal deficit further though.

“Amid the drama between the White House and Democrats, which add to the political shenanigans leading up to the November presidential elections, it’s evident that investors are clinging on to any sliver of hope that the world’s largest economy will see additional fiscal aid,” Tan said.

Analysts said Democratic challenger Joe Biden’s widening lead in the polls over President Donald Trump has also been seen as a supportive factor because it lessens, but doesn’t eliminate, the prospect of a contested election outcome on Nov. 3, a prospect that has unnerved investors fearing weeks of legal and political wrangling. The president trails Joe Biden by an average of 9.7 percentage points nationally according to the Real Clear Politics average of polling. 

“The market rally is also the result of polls – both nationally and in key states – showing that Biden’s lead is widening,” said David Donabedian, chief investment officer of CIBC Private Wealth Management.

“The market does not favor one party or another, but the widening lead reduces the odds there will be a close, contested election. That is the market’s biggest fear,” he said.

Read: Stocks are rallying because fears of a contested election are fading

COVID-19 treatment hopes were also in focus, analysts said. Gilead Sciences Inc.

said late Thursday that a late-stage study of its experimental COVID-19 treatment showed it shortened time to recovery. The drug, remdesivir, was reportedly one of the medications recently prescribed to President Donald Trump for his COVID-19 infection. Gilead shares rose 1.4%.

Earnings season gets under way next week, with major banks set to report third-quarter results.

Opinion: Get ready for a good earnings season for big U.S. banks

Friday was a light day for economic data. U.S. wholesale inventories rose by 0.4% in August as companies began to stock up again to replace dwindling supplies.s

Which companies are in focus?

  • The Wall Street Journal reported that Advanced Micro Devices Inc. AMD is in talks to buy rival chip maker Xilinx Inc. XLNX, in a deal that could be valued at more than $30 billion and mark the latest big merger in the rapidly consolidating semiconductor industry. AMD shares were down 4.1%, while Xilinx shares rose 12%.

  • AT&T

    is planning thousands of job cuts in its WarnerMedia unit as it seeks to cut costs by up to 20%, according to The Wall Street Journal. Shares were off 0.3%.

What are other markets doing?

Mainland Chinese stocks jumped as investors returned from a weeklong break, with the Shanghai Composite

rising 1.7%. Japan’s Nikkei 225 index

rose 0.1%, while Hong Kong’s Hang Seng Index

gained 0.3%.

The pan-European Stoxx 600 Europe Index

and London’s FTSE 100

each gained 0.6%.

The yield on the 10-year Treasury note

rose 2 basis points to 0.787%. Bond yields move inversely to prices.

Oil futures

turned higher and were on track for a 10.6% weekly rise as Hurricane Delta approached the Louisiana Gulf Coast. Gold

was up 1.7%, pushing back above $1,900 an ounce and turning positive for the week.

The ICE U.S. Dollar Index
a measure of the currency against six major rivals, was down 0.5%.

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