By Anna Hirtenstein and Logan Moore
U.S. stocks rose ahead of House Speaker Nancy Pelosi's Tuesday
deadline for Congress to reach an agreement on a spending package
to support American households and businesses through the
pandemic.
The S&P 500 added 0.9%, taking back some of its losses from
earlier in the week. The broad-market index fell 1.6% Monday as
investors grew concerned that lawmakers weren't making progress on
a deal.
The Dow Jones Industrial Average, meanwhile, rose 220 points.
The tech-heavy Nasdaq Composite Index advanced 0.9%.
Mrs. Pelosi has indicated that the White House needs to reach a
deal with Democrats by the end of Tuesday if the government wants
to pass the next coronavirus-relief bill before Election Day. The
California Democrat and Treasury Secretary Steven Mnuchin edged
closer on some policy differences holding up a sweeping coronavirus
relief package, but disputes remained. Both sides said they are
continuing to work on the matter.
"There has to be some form of a deal: the most likely outcome is
that they'll have to do something. Given what's happening with
Covid, the economy needs some support and markets need some form of
guidance," said Peter Dixon, an economist at Commerzbank. But "we
are really running out of time," he cautioned.
Markets have swung in recent weeks on every twist in the talks.
If passed, the stimulus package could drive a further rally in
stocks.
In bond markets, the yield on the benchmark 10-year U.S.
Treasury note ticked up to 0.788%, from 0.760% on Monday.
Investors are also continuing to assess the elevated number of
new coronavirus infections in the U.S. and Europe in recent weeks.
Restrictions in some countries including the U.K. and France have
been tightened, though most governments have avoided halting
business activity completely, shielding the economy from the worst
of the fallout.
"On the virus front, headlines are getting worse, but our base
case is still that there won't be another full lockdown," said
Fahad Kamal, chief investment officer at Kleinwort Hambros.
"There's still a big difference between localized, targeted
lockdowns and the shutdowns we had in March and April."
In economic data, permits for new construction in the U.S. were
at 1.553 million in September, rising moderately compared with the
previous month. The figures were slightly above economists'
expectations, reflecting a continued recovery in the bedrock
industry.
Lisa Erickson, head of traditional investment group at U.S. Bank
Wealth Management, said the economy is showing a nice recovery thus
far from the pandemic, but an uptick in cases isn't helping.
Meanwhile, many in the market remained focused on the presidential
election.
Longer term, Ms. Erickson said the election shouldn't have a big
impact on the market.
"If you look at past presidential elections and if you look at
scenarios with the incumbent keeping the seat, the return scenarios
are the same over time," she said.
Meanwhile, earnings reporting period continued for many
companies.
Shares of consumer retail company Procter & Gamble rose 2.4%
after it reported a surge in sales and revised up its expectations
for growth and plans for stock buybacks next year.
Fellow Dow component and property-casualty insurer Travelers
added 2.3% after reporting that its net income more than doubled in
the third quarter.
IBM shares dropped 3.7% after it reported results after hours
Monday, which included a decline in revenue and no guidance on its
outlook.
Among other stock movers, shares of drugmaker Moderna rose 2.6%
after it said its coronavirus vaccine could be authorized in
December if it gets positive results next month from its clinical
trial.
Technology firms Netflix and Snap, the developer of the SnapChat
app, are expected to release earnings after the market closes.
Netflix in particular will be closely watched for indications of
the extent to which tech companies are continuing to benefit from
people spending more time at home during the pandemic, according to
Mr. Kamal. The stock has been among the best performers this year,
and has climbed over 60% so far.
Strong results from Netflix will "be the latest bit of
validation on whether the enormous valuations that we're paying, do
they make sense?" Mr. Kamal said. "It will be reflective of the
stay-at-home trade in the wider sense, the trade that's been by far
the winner over the course of this year."
Overseas, the pan-continental Stoxx Europe 600 edged down
0.1%.
In European equities, Logitech rallied 15% after it posted a
massive jump in sales from a spike in demand for computer equipment
as more people worked from home.
UBS shares rose 4% after it said its net profit doubled from a
surge in trading and it is setting aside billions for dividends and
share buybacks.
China's Shanghai Composite Index advanced 0.5% by the close of
trading, while Japan's Nikkei 225 retreated 0.4%.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com
(END) Dow Jones Newswires
October 20, 2020 11:08 ET (15:08 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.