Wall Street jumps as Trump tweets on stimulus keep market spinning

The Nasdaq composite climbed despite a call by Democratic lawmakers for Congress to rein in the Big Tech companies that dominate it and other indexes. The proposal, which follows a 15-month investigation by a House Judiciary Committee panel, could make it harder for Amazon, Apple, Facebook and Google’s parent company to acquire others and impose new rules to safeguard competition.

Amazon rose 2.4 per cent, and Apple climbed 1.7 per cent. Google’s parent company was unchanged, and Facebook lost 0.4 per cent.

One of Mr. Trump’s favourite negotiating tactics, judging by past actions, is to walk away from the negotiating table abruptly. The intention being to frighten the other side into concessions.

Jeffrey Halley of trading and research firm Oanda

But much of the market’s attention remains fixed on the prospects for more stimulus for the economy from Washington. Wednesday morning’s gains helped the S&P 500 recoup almost all of its loss from the day before, when Trump’s tweets suddenly sent it from a 0.7 per cent gain to a 1.4 per cent loss.

Just a few hours before Trump made his announcement on Tuesday to halt negotiations, Federal Reserve Chair Jerome Powell had asked Congress to come through with more aid. He said that too little support “would lead to a weak recovery, creating unnecessary hardship.”

Some analysts characterised Trump’s move as likely a negotiating ploy.

“I do not believe hopes of a stimulus deal are now gone forever,” said Jeffrey Halley of trading and research firm Oanda. “One of Mr. Trump’s favourite negotiating tactics, judging by past actions, is to walk away from the negotiating table abruptly. The intention being to frighten the other side into concessions.”

In the longer term, many investors say a big stimulus package may still be possible regardless of what Trump says. A Democratic sweep of the upcoming elections would likely clear the way for a big government program after the transfer of power, and Wall Street has begun to see a blue wave as more likely than before.

Airlines jumped to some of the day’s bigger gains after Trump singled out the industry, asking Congress to “IMMEDIATELY” approve $US25 billion for them. Last week, Pelosi had told airline executives to halt the furloughs of tens of thousands of workers with the promise that aid for them was imminent, though a proposal by House Democrats to give the airline industry $US28.8 billion failed to advance.

United Airlines Holdings rose 4.3 per cent, American Airlines Group climbed 4.1 per cent and Delta Air Lines pulled 2.9 per cent higher.

The S&P 500 rose broadly, with technology stocks making the biggest gains. Other areas that would benefit most from a strengthening economy were also climbing, including retailers and travel-related companies.

“The market’s just been relentlessly led by long-duration growth stocks,” said Barry Bannister, head of institutional equity strategy at Stifel. “The big question is are we going to see some signs of a shift to economic growth beneficiaries.”

Smaller stocks also rose more than the rest of the market, an indication of rising optimism about the economy’s prospects. The Russell 2000 index of small-cap stocks climbed 1.6 per cent.

The 360-degree spin for Wall Street in less than 24 hours is just the latest bump in its shaky run since early last month. After plunging nearly 34 per cent early this year on worries about the coronavirus pandemic and the recession it would cause, the S&P 500 rallied back to record heights thanks to tremendous aid from the Federal Reserve and Congress, along with signs of strengthening in the economy.

It’s been struggling since setting an all-time high in early September on a range of worries. Besides the clouded prospects for more stimulus from a bitterly divided Congress when parts of the economy have begun to slow, investors are also worried about whether the continuing pandemic will lead governments to put more restrictions on businesses. Tensions between the United States and China are still simmering, and stocks still look too expensive in the eyes of some critics despite their recent pullback.

The economy experienced a sharp rebound shortly after the initial shock from shutdowns, but that recovery is slowing and there may be some lasting damage that will be difficult to overcome.

“What we’re seeing now is some lasting damage to personal services, employment prospects and the widening of gaps that feed a political maelstrom that is not good for the future,” Bannister said.

The yield on the 10-year Treasury remained at 0.76 per cent from late Tuesday. It had slid following Trump’s initial tweets, after climbing to its highest level since June.

The German DAX gained 0.2 per cent, and the French CAC 40 slipped 0.3 per cent. The FTSE 100 in London fell 0.1 per cent. Asian markets ended mixed.

AP