By William Watts, and Andrea Riquier
U.S. stocks rose Friday as investors remained optimistic over prospects for another round of fiscal stimulus from Congress eventually, with major benchmarks posting their best week since the summer.
What did major benchmarks do?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.57% rose 161.39 points, or 0.6%, to close at 28,586.90, while the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.30% added 30.30 points, or 0.9%, to 3,477.13. The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.09% gained 158.96 points, or 1.4%, to end at 11,579.94.
The Dow on Thursday rose 122.05 points, or 0.4%, to finish at 28,425.51, while the S&P 500 advanced 27.38 points, or 0.8%, to close at 3,446.83. The Nasdaq Composite finished at 11,420.98, up 56.38 points, or 0.5%.
For the week, the Dow gained 3.3%, while the S&P 500 was up 3.8% and the Nasdaq was up 4.6%. That marked the strongest weekly rise for the blue-chip index since Aug. 7 and the best for the S&P 500 and Nasdaq since July, according to FactSet. The small-cap Russell 2000 /zigman2/quotes/210598147/delayed RUT +1.28% advanced 0.5% on Friday, but closed the week 6.4% higher.
What drove the market?
Investors remained optimistic about another fiscal stimulus package being passed by Congress eventually and stocks advanced late in the week, encouraged by continued talks between House Democrats and the Trump administration.
The on-again, off-again fiscal stimulus talks in Washington sped up Friday, as bargaining warmed up over a comprehensive deal, a prospect President Trump rejected only three days ago. But after House Speaker Nancy Pelosi and U.S. Treasury Secretary Steven Mnuchin talked by phone, the provisions of the plan for coronavirus testing remained a sticking point.
Prior to the Pelosi-Mnuchin discussion breaking up, Trump expressed his hope for a big deal while on a conservative radio talk show.
Amid reports the administration was willing to go to $1.8 trillion from its previous level of $1.6 trillion in its offer, compared to the Democrats $2.2 trillion proposal, Larry Kudlow, director of the White House’s National Economic Council, said Trump had signed off on a revised offer.
The situation marks a sharp turnaround from Tuesday afternoon, when Trump tweeted he was pulling out of talks and both Pelosi and the Republican party Senate Majority Leader Mitch McConnell appeared to accept the negotiations were over until after the election.
But McConnell’s path to getting a deal of more than $1 trillion passed in the Senate would appear difficult as he has said some of his Republican colleagues don’t want to see more stimulus spending at all.
“Stimulus is one of the most important topics in the market today,” said Ben Kirby, co-head of investments at Thornburg Investment Management.
But Kirby thinks the odds are low that anything passes in the next few weeks. “It’s not in either party’s best interest to do a package ahead of the election. I think they’re incentivized to play ball but not come to a deal. I view election uncertainty as noise and I would be a buyer on short-term volatility.”
Analysts also said Democratic challenger Joe Biden’s widening lead in the polls over President Donald Trump has also been seen as a supportive factor because it lessens, but doesn’t eliminate, the prospect of a contested election outcome on Nov. 3, a prospect that has unnerved investors fearing weeks of legal and political wrangling. The president trails Joe Biden by an average of 9.7 percentage points nationally according to the Real Clear Politics average of polling.