U.S. stock benchmarks were holding on to gains Thursday to start October and a new quarter, with investor attention on last-ditch negotiations for another fiscal stimulus package in Congress.
The Dow Jones Industrial Average (DJIA) were climbing by about 90 points, or 0.4%, at 27,875, but off its peak at 28,041.46, while the S&P 500 index (SPX) advanced about 17 points, or 0.3%, at roughly 3,379. The Nasdaq Composite Index (COMP) was, meanwhile, rising by about 102 points to reach about 11,268, a gain of 0.9%.
On Wednesday, the Dow rose 329.04 points, or 1.2%, to close at 27,781.70, while the S&P 500 index gained 27.53 points, 0.8%, to end at 3,363. The Nasdaq finished 0.7%, or 82.26 points higher, at 11,167.51.
A fresh round of stimulus is the key driver for markets this week, even if the likelihood of a deal being struck seems unlikely.
“The major indices are showing modest gains on the back of hopes that policy makers will reach a compromise on the stimulus package,” wrote David Madden, market analyst at CMC Markets UK.
Market participants are clinging to the prospect of another package of aide after failed talks on Wednesday, gave way to new discussions on Thursday.
House Speaker Nancy Pelosi expressed some hope that an agreement could be struck, after earlier Thursday expressing doubts about a pact between Democrats and Republicans.
Investors are hoping that a delay on Wednesday by the House on a vote on the Democrats $2.2 trillion rescue package might mean progress is still possible.
“I don’t think we’re going to make significant progress until tomorrow, at this point,” U.S. Treasury Secretary Steven Mnuchin said in an interview on Fox Business Network late Wednesday. “If there’s a fair compromise, we’re prepared to do it,” he said.
Goldman Sachs analysts in a recent report called the prospect of a new round of fiscal stimulus before the year’s end “unlikely” and said that if House Democrats take a vote on a package and fail, then that would signal the end of negotiations with the White House.
Speaking to CNBC in an interview on Wednesday, San Francisco Federal Reserve President Mary Daly said a new round of government aid is crucial to the recovery, reiterating an often-stated comment by many members of the central bank. “We are not out of those woods yet, so we need a longer bridge,” she said during an interview on “Closing Bell.” Daly is not currently a voting member of the Fed’s rate-setting Federal Open Market Committee.
Meanwhile, the Fed announced that it would continue to limit the disbursal of capital to investors in the form of stock buybacks and dividends through the fourth quarter for banks with over $100 billion in assets, which could weigh on moves in financial stocks which have been lagging behind other sectors of the market during the recovery in the broader equity market since March.
In economic reports, the number of Americans who applied for jobless benefits fell slightly in mid-September to the lowest level since the start of the coronavirus pandemic, though remaining at a level that underscores the need for another government rescue package for businesses and the unemployed. Initial jobless claims filed through state programs dropped to 837,000 in the week ended Sept. 26 from a revised 873,000 in the prior week. Economists polled by MarketWatch had forecast new claims to fall to 840,000.
Americans ratcheted up their spending in August for the fourth month in a row, helped by fiscal stimulus measures, but the increase was the smallest since the U.S. reopened businesses and pointed to a slower economic recovery. Incomes declined by 2.7%, the biggest drop since early in the pandemic.
The Institute of Supply Management’s manufacturing index slipped to 54.6% in September from a 21-month high of 56% in the prior month. A reading of 50 or above indicates improving conditions.
Although the data fell below average economists’ estimates for 56.5 surveyed by MarketWatch, it showed expansion for a fifth month in a row as factories coped with the coronavirus and brought back more workers, a good sign for a U.S. economy still recovering from the worst pandemic in a century.
The less-closely followed IHS Markit September purchasing managers index for manufacturing posted 53.2 in September, broadly in line with 53.1 seen in August.
Among Fed speakers, New York Fed president John Williams was set to speak at 11 a.m., while Gov. Michelle Bowman was set to speak at 3:30 p.m. Both are regular FOMC voting members.
The 10-year Treasury note yield (BX:TMUBMUSD10Y) rose 0.7 basis point to 0.69% Wednesday, a day after booking its biggest one-quarter yield gain since Dec. 2019, according to Dow Jones Market Data. Bond prices move inversely to yields.
U.S. benchmark crude futures for November delivery (CRUD) fell $2.02, or 5%, to $38.20 a barrel on the New York Mercantile Exchange, amid concerns about rising case counts. Gold futures (GCZ0) rose 1.1% to trade at $1,916.20 an ounce.
The ICE U.S. Dollar index (DXY) , a gauge of the greenback’s strength against a basket of currency trading partners, edged down 0.2%.