MANHATTAN (CN) — U.S. markets starting the day on a mildly positive note took heart Wednesday afternoon in the demise of Senator Bernie Sanders’ presidential campaign.
Sanders announced his withdrawal from the Democratic primary early Wednesday, paving a clearer path to the White House for former Vice President Joe Biden and easing some fears on Wall Street.
An underdog to win the nomination, had a longtime scourge against Wall Street, Sanders had just 914 delegates to Biden’s 1,217.
Upon hearing the news that Sanders was out, the Dow Jones Industrial Average gained about 400 points, with the S&P 500 and Nasdaq climbing about 2% each.
All three markets built on those gains, with the Dow finishing at 23,426 points, a 3.4% increase for the day.
“I think that anything that resolves doubt or uncertainty is in some ways appreciated by the market, even if it is not good news,” said Robert Hockett, a law professor at Cornell University. “People are so flummoxed and feeling such vertigo, anything that resolves at least one doubt is appreciated.”
“My more Wall Streetish friends have been saying we’ll hold our noses if we have to and vote Biden if it’s Biden,” said Hockett, a former spokesman for the Sanders 2016 campaign who has also worked for the Federal Reserve Bank of New York and the International Monetary Fund.
A survey of 2,300 Sanders supporters released on Wednesday by The Morning Consult found that 80% of those voters would likely vote for Biden in the fall. Only 7% said they would now vote for President Donald Trump.
Sanders’ platform included a plan to break up and cap the size of many Wall Street giants, and the Democratic presidential candidate once said, “The business model of Wall Street is fraud.”
Former Goldman Sachs Chairman Lloyd Blankfein once quipped that “I might find it harder to vote for Bernie than for Trump.”
And when JPMorgan Chase CEO Jamie Dimon derided the Sanders campaign as a disaster for the country, the Vermont senator famously retorted: “That’s funny. Jamie Dimon seemed fine with corporate socialism when his bank got a $416 billion bailout from American taxpayers.”
One of the key parts of the Sanders campaign was universal health care. Stocks at several leading health insurance companies rallied on Wednesday, with United Healthcare gaining nearly 8%, and Cigna and Humana both seeing gains of more than 5%.
The Sanders campaign may have pushed Biden’s further left on certain issues, though not left enough to spook all of Wall Street. “In the wake of the virus, there is some thought that Bernie has won the war even if he lost the battle,” Hocket said.
Markets also took comfort with comments by Treasury Secretary Steven Mnuchin, who has promised an additional $250 billion in small business loans to help prop up the Small Business Administration’s troubled $349 billion lending program.
As of Tuesday, SBA data show more than 275,000 loan applications worth $75 billion had been approved. Banks are struggling to handle the new loan apparatus, however, and turning borrowers away.
In an interview Wednesday morning on CNBC, Mnuchin tried to reassure investors, saying the government would not run out of funds for small businesses.
“I want to assure all small businesses out there: We will not run out of money,” Mnuchin told CNBC Wednesday morning. “And we want to assure everybody if you don’t get a loan this week, you’ll get a loan next week or the following week. The money will be there.”
Following Mnuchin’s remarks, congressional Democrats pitched a plan for an additional $250 billion in small business loans, as well as $100 billion to help fund hospitals, and $150 billion for state and local governments.
Other government agencies also are trying to ease lending to small businesses. Following the announcement by Wells Fargo that it could no longer service the loan program, the Federal Reserve announced Wednesday it would amend a previous consent order with the bank so it could continue to provide loans.
The Fed in early 2018 had restricted the bank’s asset growth to its 2017 levels following allegations the bank had encouraged its employees to sell no matter what and that millions of fake customer accounts were opened without consent. The changes do not otherwise affect that enforcement action.
The Fed also has loosened loan modification regulations, and later this week plans to provide term financing backed by the SBA’s loans.
Officials are hoping cases of coronavirus are starting to plateau in the hardest-hit areas, but several countries have seen a surge in deaths. More than 1.4 million people have been confirmed to have Covid-19, and more than 87,000 have died worldwide, according to data compiled by Johns Hopkins University.
In the United States, New York — the first to be struck heavily by the virus and by far the hardest-hit — posted its highest single-day death toll on Monday, pointing to further misery to come. About 404,000 have been infected by the virus in the United States, while roughly 14,000 have died.
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