Stocks Rise on Hopes for New Coronavirus-Relief Package
August 05 2020 - 10:49AM
Dow Jones News
By Caitlin Ostroff
U.S. stocks rose Wednesday after White House negotiators said
they aim to reach a deal on a new coronavirus-relief package by the
end of the week.
The S&P 500 gained 0.6%, and the tech-heavy Nasdaq Composite
added 0.4%. The Dow Jones Industrial Average advanced 1%, or about
270 points, boosted by a big gain in shares of Walt Disney.
Investors have been watching for signs that the government will
deploy more fiscal stimulus to help counter the economic damage
caused by the pandemic. Negotiators from the White House said
Tuesday that they aim to reach agreement with Democrats on another
aid package by week's end. Both sides have said they made progress
in talks to bridge differences on unemployment payments and other
proposals.
Economists have worried that a rise in U.S. coronavirus
infection rates last month could curtail economic recovery as some
regions moved to impose local restrictions to curb the number of
cases. Wednesday's ADP National Employment Report showed nonfarm
private-sector employment in the U.S. increased by 167,000 jobs in
July, smaller than the 1 million increase economists expected.
This week, new coronavirus cases have inched lower, lending to
optimism for a faster economic recovery.
"What we have had so far is where economic activity and
infection rates have been decoupled," said Altaf Kassam, head of
investment strategy for State Street Global Advisors in Europe.
"Going forward, we are going to have them much more coupled
together. Economic activity and infection rates are going to be
much more closely linked."
Also on the radar for markets: Deteriorating relations between
Beijing and Washington, which are likely to weigh on investors'
sentiment. The U.S. and China have agreed to high-level talks on
Aug. 15 to assess Beijing's compliance with the bilateral trade
agreement signed early this year, The Wall Street Journal reported
late Tuesday.
As earnings season continues, shares of Walt Disney rose 9.8%
after the media and entertainment company reported strong
subscriber growth for its streaming service. Shares of payments
company Square gained 14% after the company beat analysts'
expectations for earnings and revenue.
Gold gained 1.9% to $2,059.80 a troy ounce, extending a bull run
that has gained momentum during the coronavirus pandemic. This
year's sharp drop in yields on U.S. Treasurys to levels below the
expected pace of inflation is making gold, which doesn't generate
an income, more attractive as a store of value. The precious metal,
viewed as a haven asset, is also drawing investors concerned that
the economic fallout from the pandemic may lead to another rout in
stocks.
"It reminds me of the price rally in 2011 when gold posted its
previous record," said Carsten Fritsch, an analyst at Commerzbank.
He said gold could climb higher given guidance from the Federal
Reserve that central bankers will keep interest rates low. "There's
no hint of higher interest rates in the near future, even if
there's an uptick in economic activity," he said.
Brent crude oil rose 3.7% to $46.07 a barrel, its highest since
Saudi Arabia and Russia started a price and production war in
March. Optimism among investors, falling U.S. inventories and a
weaker dollar have supported oil. The ICE U.S. Dollar Index, which
measures the greenback against a basket of currencies, fell
0.7%.
In bond markets, the yield on the 10-year Treasury ticked up to
0.538%, from 0.514% Tuesday, which was the second-lowest closing
level this year. Government bond yields, which move inversely to
price, have weakened in recent weeks following guidance from major
central banks that interest rates are likely to remain low for an
extended period.
Karen Langley contributed to this article.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com
(END) Dow Jones Newswires
August 05, 2020 10:34 ET (14:34 GMT)
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