MANHATTAN (CN) — The White House and Senate finally agreed to a $2 trillion stimulus package early Wednesday morning, but investors appeared cautious this morning about building on Tuesday’s historic gains.
The Phase III stimulus, the largest in history, finally passed the Senate after days of wrangling. The package now awaits an official vote in the Senate, after which it would need passage in the House.
Upon hearing the news, stock futures initially rallied but then quickly flattened, with S&P 500 and Nasdaq futures dropping about 1% an hour before the opening bell.
A few minutes after the morning bell, the Dow Jones Industrial Average crept up 1.5% while the S&P 500 and Nasdaq both remained under a point in growth.
Lawmakers had hoped the stimulus package would electrify markets.
The package had initially stalled over a controversial $500 billion fund set up for “distressed businesses” to be paid at the treasury secretary’s discretion. 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 also expands unemployment insurance for 13 weeks and reportedly allows workers laid off due to the coronavirus to temporarily keep their full salaries.
About $130 billion was set aside for hospitals, while $150 billion was designated for states and local government. Small businesses will receive $367 billion to help them maintain their payroll during the pandemic.
Some individuals are set to receive checks as part of the package, with U.S. adults receiving $1,200 and children getting $500 each. Those checks would be phased out for higher-income individuals and families.
Investors in Asia signaled their happiness with the stimulus deal. Japan’s Nikkei market closed 8% up, and South Korea’s KOSPI and Australia’s ASX 200 both increased more than 5%.
European stocks saw mild gains early, with the Financial Times Stock Exchange leading the pack with just over a point increase. But Germany’s DAX was down about a point as of 8 a.m. E.S.T.
While Tuesday’s historic rally was the best since 1933, all the top rallies in the Dow have come during an economic downturn. Five of the top six Dow rallies — all except Tuesday’s market gains — came during the Great Depression.
More action by the federal government is sure to come soon. The Federal Reserve, which announced Monday it would start an open-ending lending program to businesses to keep liquidity flowing, also stated it would pare back its examination activities, mostly at smaller banks.
President Trump also said social-distancing recommendations, which had shuttered many businesses and limited gatherings of citizens, might soon end.
Speaking at a virtual town hall Tuesday. President Trump said he would like to see the nation’s economy opened back up in less than three weeks. “I would love to have the country opened up and raring to go by Easter,” the president said.
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.
More than 435,000 have been affected worldwide, with nearly 20,000 deaths. In the United States, more than 55,000 are confirmed infected while more than 800 have died from the virus.