Stock Market Continues to Climb, Buoyed by Senate Vote

MANHATTAN (CN) — U.S. markets built slightly on Tuesday’s rally as the $2 trillion stimulus package makes its way through the Senate.

Despite an early dip in the morning, the Dow Jones Industrial Average closed more than 150 points higher than at the morning bell, with the S&P 500 seeing about a 1-point increase. The Nasdaq dropped slightly.

The marginal gains compound what was already a historic rally on Tuesday, after senators hammered out a deal on the stimulus package.

A couple walking through otherwise-deserted Times Square in New York look at news coverage of the coronavirus outbreak in Woodbridge, N.J. (AP Photo/Mary Altaffer)

The full text of the bill has not yet been released, but it is said to include the controversial $500 billion for “distressed businesses” that originally stalled passage. Democrats had slammed the provision as a “slush fund,” holding up the bill over the weekend and through Monday.

As part of the final bill, an inspector general and congressional panel will oversee the $500 billion fund.

The stimulus package also reportedly allows limited buybacks by companies receiving government bailout funds, though President Trump has said he strongly opposes allowing companies to use stimulus funds for buybacks.

Another potential sticking point in the bill Wednesday was the expansion of unemployment insurance for 13 weeks and allowing workers to keep their full salaries.

Several Republican senators who originally supported the stimulus reportedly began re-evaluating the bill amid concern that the bill’s language could actually incentivize companies to lay off employees.

The stimulus includes $130 billion for hospitals, $150 billion for states and local government, and $367 billion to help small businesses maintain their payroll during the pandemic.

New York Governor Andrew Cuomo also criticized the bill, saying, as a percentage of state budget, New York would receive the second-lowest amount of funds among states while others not as hard hit by the coronavirus would receive larger shares.

“New York state had 30 times the number of cases as Texas’ 1,031,” Cuomo said Wednesday. “The gross political manipulation is obvious.”

In Europe, the stimulus helped spur markets to close with mild gains. France’s CAC and the United Kingdom’s Financial Times Stock Exchange closed with 4.5% increases, while the pan-European Stoxx 600 lifted about 3% on the day.

Dire economic warnings have been temporarily replaced by tepid optimism over the last two days. Former Federal Reserve Chairman Ben Bernanke said in an interview with CNBC that while a recession is likely, he hopes it will be “very short” due to the efforts of Fed chairman Jerome Powell and lawmakers.

“If there’s not too much damage done to the workforce, to the businesses during the shutdown period, however long that may be, then we could see a fairly quick rebound,” Bernanke said.

The Fed, which had already slashed its interest rates nearly to zero, earlier this week announced moves to offer open-ended borrowing “as needed” to free up liquidity. The central bank also promised to soon open a lending program for small- and medium-sized businesses.

International groups have also called for more action. On Wednesday the International Monetary Fund and the World Bank both called on governments to allow poorer countries to suspend their debt payments so they can focus on their response to the pandemic. The request would apply mostly to sub-Saharan African countries.

The groups said in a statement, “It is imperative at this moment to provide a global sense of relief for developing countries as well as a strong signal to financial markets.”

Cases of Covid-19, the new strain of coronavirus, have more than doubled in the last week, according to data compiled by Johns Hopkins University.

About 455,000 have been affected worldwide, with more than 20,000 deaths. In the United States, which the World Health Organization has warned could become the next epicenter for the coronavirus pandemic, more than 61,000 are confirmed infected while about 850 have died from the virus.

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