Stimulus Deal Fuels Rally On Wall Street

The majority of stocks added to yesterday’s lofty gains thanks to the stimulus deal reached in Washington, with the Dow leading the way higher again amid Boeing’s (BA, +30%) historic rally. The Dow was up 496 or 2.4%, to 21,201, the Nasdaq lost 34, or 0.5%, to 7,384, while the S&P 500 rose by 28, or 1.2%, to 2,476. Advancing issues outnumbered decliners by a 4-to-1 ratio on the NYSE, where volume was relatively hig

Traders said that while the scary last-minute selloff could spell trouble for bulls, the fact that stocks held on to yesterday’s gains is already a positive surprise. As one trader explained, “We saw the first two-day winning streak in the Dow for the first time in over three weeks, but volatility remains extremely highs and the Nasdaq’s relative weakness might already signal the end of the oversold rally.”

While the exact details of the stimulus package are still unknown, eligible taxpayers will receive a check of over $1,000, with a further $250 billion being set aside for unemployment insurance benefits. As for the corporate sector, the rumored $500 billion bailout fund will require firms to halt stock buyback for a full year after the government loan is paid back and suspend dividend payments until the loan is outstanding. Yet another $350 billion will likely go towards small business loans, and coupled with the Fed’s unlimited quantitative easing program, the package is by far the biggest in the country’s history.

Even though the steep selloff in the last 20 minutes of trading made today’s session a mixed one for bulls, most of the key sectors finished the day in the green, with the one crucial exception, the tech sector. The Dollar Index (DXY) declined for the third day in a row, as investors turned more optimistic about the length of the global lockdowns and the state of the global financial system. While the optimism might turn out to be short-lived, the period of forced liquidations could be over and markets could continue to normalize in the coming days.

Credit and currency markets had another crazy session, with especially high-yield corporate bonds and the British pound experiencing volatile swings. Investors tried to gauge the impacts of the stimulus package on the corporate sector, and high-yield bonds continue to be the most vulnerable to the crisis. The U.K reported a huge jump in the number of infections and the fact that Prince Charles, the heir of the British crown also tested positive for the COVID-19 virus also weighed on investor sentiment in the country.

As always, have a great evening, stay calm, stay home, stay healthy, do your part to flatten the curve and stay tuned!!!

Joe