NEW YORK: Wall Street’s main indexes jumped on Wednesday as investors grew hopeful of at least a partial deal on more fiscal stimulus after US President Donald Trump abruptly called off negotiations on a comprehensive bill in the previous session.
Ten of the 11 major S&P indexes were up, led by gains in materials, financials, industrials and consumer discretionary stocks. Only the real estate sector - considered a defensive play - was marginally lower.
The Dow Jones airlines index jumped 2.6% after Trump urged Congress on Tuesday to pass a series of smaller, standalone bills that would include a bailout package for the battered airline industry.
The S&P small- and mid-cap indexes have lagged a rebound in the S&P 500, which was driven by a narrow rally in large-cap technology stocks.
While the benchmark index is up 5% on the year, the small-cap and mid-cap indexes are still down about 11% and 5%, respectively.
At 11:28 a.m. ET, the Dow Jones Industrial Average was up 1.55%, the S&P 500 was up 1.29% and the Nasdaq Composite was up 1.34%.
The S&P banking subindex jumped 1.9% as bond prices fell ahead of a $35 billion US 10-year note auction later in the day.
“The market is reacting positively to the fact that there is a possibility of targeted stimulus,” said Carlton Neel, chief executive officer of investment research firm Chaikin Analytics in Philadelphia.
Hopes of a new round of fiscal aid had fueled a broad rally in US stocks on Monday. Federal Reserve Chair Jerome Powell on Tuesday also called for more help for businesses and households to keep a nascent economic recovery from faltering.
Minutes of the Fed’s September policy meeting are due later in the day, with investors looking for details on the central bank’s new approach to inflation.
On Wednesday, Vice President Mike Pence and Democratic challenger Kamala Harris are also set to square off in their only debate, which comes less than a week after Trump contracted Covid-19.
Reuters/Ipsos opinion polls released on Tuesday showed Democratic presidential candidate Joe Biden expanding his lead over Trump in battleground Michigan and the two candidates locked in a toss-up race in North Carolina.
“A Biden presidency will probably have even more fiscal stimulus and that could be more positive for smaller businesses, so there’s a chance that small-caps will actually start to outperform versus the big technology companies,” Neel said.
Analysts expect earnings at S&P 500 firms to have dropped about 21% in the third quarter, according to IBES data from Refinitiv.
Still, the pace of declines is expected to have slowed following a 30.6% slump in the second quarter, when Corporate America took a hit from nationwide lockdowns.—Reuters