AP – Wall Street closed out its best week in three months on Friday as investors drew encouragement from ongoing negotiations on Capitol Hill aimed at delivering more aid to the ailing United States (US) economy.
The S&P 500 rose 0.9 per cent, its third straight gain. The benchmark index ended the week with a 3.8 per cent gain, its strongest rally since early July.
Much of this week’s focus has been on Washington, where US President Donald Trump sent markets on a sudden skid on Tuesday after he halted negotiations on a support package for the economy until after the election.
He appeared to change his mind a few hours later, however. On Friday, Trump was cheerleading the prospect of a deal, declaring on Twitter that talks on a new aid package are “moving along. Go Big!”
“The fact that Trump reversed course, I think, has given people optimism again,” said Vice President of Trading & Derivatives at Charles Schwab Randy Frederick.
The market’s solid finish follows a weekslong run of mostly shaky trading over worries that Congress and the White House won’t deliver more support for the economy as it reels from the impact of the pandemic and concerns that stock prices simply got too high during the summer.
The S&P 500 rose 30.31 points to 3,477.14. The Dow Jones Industrial Average gained 161.39 points, or 0.6 per cent, to 28,586.90. The gain nudged the Dow into positive territory for the year. The Nasdaq composite climbed 158.96 points, or 1.4 per cent, to 11,579.94.
Small-company stocks added to their solid gains this week.
The Russell 2000 index picked up nine points, or 0.6 per cent, to 1,637.55. The index jumped 6.4 per cent this week.
Investors have been clamouring for more federal aid since the expiration of extra benefits for laid-off workers and other stimulus for the economy that Congress approved earlier this year. Economists said the outlook is grim without such support, and the chair of the Federal Reserve has said repeatedly it will likely be necessary.
Still, the prospects for a new deal on more aid have been shaky, especially this week.
Trump said that House Speaker Nancy Pelosi was negotiating in bad faith when he called off the talks on Tuesday.
But within a couple hours, he appeared to backtrack. He said that he would back more limited programmes that would send USD1,200 payments to Americans and support the airline industry and small businesses specifically.
On Friday the White House increased its offer to USD1.8 trillion, up from USD1.6 trillion, according to a Republican aide familiar with the plan. Pelosi’s most recent public proposal was about USD2.2 trillion, though that included a business tax increase that Republicans won’t go for.
Pelosi and Treasury Secretary Steven Mnuchin spoke on the phone for 30 minutes on Friday, but nothing concrete appeared to immediately emerge from the discussion. Senate Majority Leader Mitch McConnell said he doubts a deal will get done before the election. Frederick said the uncertainty over another stimulus package remains a “substantial risk” to the market.
This week’s rollercoaster – where the S&P 500 swung at least 1.4 per cent for three straight days- is just the latest bout of volatility for a market that has been notably rocky for weeks.
“When the world’s financial markets are at the mercy of the randomness emanating from the White House, it is hardly surprising that investors elsewhere would prefer to wait on the side-lines,” said Jeffrey Halley of Oanda in a report.
“Unfortunately, things are unlikely to settle down over the next few weeks.”