By Anna Hirtenstein and Logan Moore
U.S. stocks finished higher Tuesday on optimism that Congress
would reach an agreement on a spending package to support American
households and businesses through the pandemic.
The S&P 500 added 0.5%, 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
The Dow Jones Industrial Average, meanwhile, rose 0.4%. The
tech-heavy Nasdaq Composite Index advanced 0.3%. All three major
U.S. indexes were higher earlier in the session.
House Speaker Nancy 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 have edged closer on some policy differences recently, Mrs.
Pelosi said Tuesday, but disputes remain.
"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
In bond markets, the yield on the benchmark 10-year U.S.
Treasury note ticked up to 0.796%, 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
The rise in permits shines a bright light on the economy, said
Michael Sheldon, chief investment officer at RDM Financial Group.
He said this is in line with other housing data that has recently
Other indicators to lookout for, he said, include the monthly
leading economic index that will be released Thursday. This will
give investors a clear view of what the next six to 12 months will
In recent weeks, RDM has been trying to ignore the presidential
election and focus on indicators like gross domestic product and
"We often take the longer-term perspective," he said.
Lisa Erickson, head of traditional investment group at U.S. Bank
Wealth Management, said the economy is showing a nice recovery so
far from the pandemic, but an uptick in cases isn't helping.
In the 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
Shares of consumer retail company Procter & Gamble rose 0.5%
after it reported a surge in sales and raised its expectations for
growth and plans for stock buybacks next year.
Fellow Dow component, property-casualty insurer Travelers, added
5.7% after reporting that its net income more than doubled in the
IBM shares dropped 6.5% after it reported results after hours
Monday which included a decline in revenue and no guidance.
Among other stock movers, shares of drugmaker Moderna rose 0.6%
after it said its coronavirus vaccine could be authorized in
December if it gets positive results next month from its clinical
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 fell 0.4%.
In European equities, Logitech rallied 16% 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
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 email@example.com
(END) Dow Jones Newswires
October 20, 2020 16:21 ET (20:21 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.