Movement in Covid Stimulus Talks Pushes Markets Higher

A surgical mask is placed on The “Fearless Girl” statue outside the New York Stock Exchange. (AP Photo/Kevin Hagen)

MANHATTAN (CN) — Markets rose dramatically on Monday, building on last week’s gains and ignoring prior weeks of losses.

Much of the optimism on Wall Street may be due to inklings that a stimulus deal could finally be imminent. Over the weekend, House Speaker Nancy Pelosi told committee chairs to create a scaled-back coronavirus relief package, according to several news outlets.

The widening window for a stimulus bill before the election, even if such a window remains small, seemed to goose investors Monday.

The Dow Jones Industrial Average gained more than 300 points at the opening bell, climbing steadily throughout the day to finish at a 410-point increase. The S&P 500 and Nasdaq saw similar gains of about 1.5% and 1.8%, respectively.

However, some analysts predict the party on Wall Street could turn sour just as quickly. Stephen Innes, chief global market analyst at AXI Trader, wrote in an investor’s note that “lingering optimism around a U.S. stimulus package is getting offset by rising Covid concerns.”

However, Innes added it has become “de rigueur for investors to dive into tech stock as another quality Covid hedge. And why not? The greater the risk of more draconian stay-at-home measures only increases the use of internet technology.”

Other experts say the upcoming presidential election may also create a drag on Wall Street. “Markets are trying to regain their footing, but with so much election uncertainty looming that may take time,” wrote James Meyer, principal at Tower Bridge Advisors. “In the meantime, change caused by the pandemic continues to have a greater impact on individual companies than the presidential election.”

Analysts at Oxford Economics noted investors are pricing in greater volatility due to the uncertainty about the upcoming presidential election, that the predicted surge in mail-in votes could delay the election results and thus mute any market reaction even if a winner is quickly declared.

“We fear a larger risk-off trade if a winner is not quickly declared,” the analysts wrote. “Parallels with the disputed 2000 election between Al Gore and George Bush would be informative, but more severe market disruptions are an important risk.”

While no major economic indicators came out Monday, the rest of the week will feature some notable data points and speeches. On Tuesday, Federal Reserve vice chair Randal Quarles will speak about the stability of the international financial system, while the monthly consumer confidence index will be released and the first of three televised presidential debates will take place that evening.

The following day, ADP’s monthly employment report — which many believe will show an uptick in jobs — will release. The rest of the week will be rounded out by the weekly unemployment report, updated GDP numbers, data on core inflation, and manufacturing and wholesale inventories.

Another benchmark will be hit very soon and according to some trackers already has: the world surpasses 1 million dead from coronavirus. More than 33 million have contracted Covid-19 worldwide, according to data compiled by Johns Hopkins University. In the United States alone, more than 7.1 million have been confirmed infected while nearly 205,000 have died.

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