Stocks and index ETFs achieved fresh closing highs on Thursday, buoyed by optimism that lawmakers might complete negotiations over additional fiscal aid before the end of the year.
The S&P 500 advanced 0.6%, holding above the 3,700 level, as the tech-based Nasdaq rallied 0.84%. Meanwhile, the Dow Jones Industrial Average gained roughly 150 points, or 0.5%.
Major stock ETFs also broke to higher ground on Thursday as well, inspired by the possibility of more stimulus. The SPDR Dow Jones Industrial Average ETF (DIA), SPDR S&P 500 ETF Trust (SPY), and Invesco QQQ Trust (QQQ) all closed higher on the day.
Real estate was one of the best-performing sectors in the S&P 500, boosting the iShares U.S. Real Estate ETF (IYR) by almost 1%.
Analysts noted the impact of stimulus hopes on the market rally, as lawmakers on Wednesday are nearing an agreement over a $900 stimulus package which could include direct payments to individuals, similar to the original package.
“Stimulus is still the main driver in the market right now until they get something done, and it does appear there is some motivation on that front to get something done,” said Dan Deming, managing director at KKM Financial. “The market’s benefiting from that” enthusiasm.
Stimulus Optimism Despite Continued Uncertainty
There is still uncertainty over how the stimulus will play out however as disagreements continue over whether to eliminate liability protections for businesses or aid to state and local governments, but Senate leaders like Mitch McConnell see the relief day as almost complete.
While investors appraise the likelihood of impending stimulus, the coronavirus cases continue to mount at a quickening pace. Based on a seven-day averages from Johns Hopkins University data, the U.S. is recording at least 215,729 additional coronavirus infections cases each day, including over 247,000 new infections on Wednesday alone.
States have locked down citizens or re-imposed more stringent social-distancing measures in a number of states that are stymying parts of the economy such as the labor market, where jobless claimed spiked recently. On Thursday, data revealed that jobless claims totaled 885,000 last week, their loftiest level since early September.
“Until COVID is more under control, claims are going to continue to be elevated,” Thomas Simons, money market economist at Jefferies, wrote in a note.
To assuage concerns, on Wednesday, the Federal Reserve promised to continue to purchase bonds until the economic recovery is completed, or hasten pace of bond buying if the recovery falters.
Experts like Gregory Faranello, head of U.S. rates trading at AmeriVet Securities, feel that U.S. monetary policy could be lax for some time.
“They feel that there still are disinflationary forces globally to contend with, and they are being realistic about their timeframe and their ability to achieve their inflation goal” of 2%, Faranello said. “This lends itself to this theme [of rates]staying lower-for-longer.”
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