U.S. stocks closed higher Wednesday, leaving the Nasdaq Composite Index with its 31st record close this year, as investors embraced corporate earnings and service-sector data that surprised to the upside.
Reports of some progress in Congress toward a fresh coronavirus relief package also offered some support for the bulls.
How did equity benchmarks perform?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.20% rose 373.05 points, or 1.4%, to settle at 27,201.52, its largest daily percent gain since July 14, while the S&P 500 /zigman2/quotes/210599714/realtime SPX +0.83% gained 21.26 points, 0.6%, to end at 3,327.77. The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.74% added 57.23 points, 0.5%, closing at 10,998.40, after briefly setting an intraday 11,002.11 record high.
On Tuesday, the Dow picked up 164.07 points, or 0.6%, at 26,828.47; the S&P 500 index rose 11.90 points, or 0.4%, to 3,306.51, while the Nasdaq Composite Index finished 38.37 points, or 0.4%, to close at 10,941.17.
What drove the market?
The stock market closed higher Wednesday, supported by hopes for progress toward another fiscal relief package in Congress and better than expected corporate earnings results.
Late Tuesday, reports suggested that, Trump administration officials and congressional Democratic leaders are working to reach a coronavirus aid bill deal by the end of the week even if the parties still remain far apart on the issues.
As lawmakers wrangle over additional pandemic aid, House Speaker Nancy Pelosi on Wednesday said the Trump administration might be able to unilaterally extend the federal moratorium on tenant evictions put in place in March by the CARES Act that expired on July 25.
“It’s all about the prospects of a stimulus package and earnings that have been coming in, for the most part, better than expected,” Peter Cardillo, chief market economist, Spartan Capital told MarketWatch. “So, the stock market keeps rallying. And of course, the basic powerhouse of this is the generous Fed.”
The Federal Reserve has used up only a fraction of its roughly $2 trillion slate of emergency lending facilities to keep liquidity going, letting investors do the rest. The central bank also has vowed to keep up its unlimited Treasury bond buying program, which comes as the U.S. Treasury Department prepares a record sale of bonds and notes next week to help finance the response to the COVID-19 pandemic.
Meanwhile, concerns over the coronavirus led Democratic presidential candidate Joe Biden on Wednesday to decide not to travel later this month to Milwaukee to accept his party’s White House nomination, according to several news reports, underscoring how COVID-19, tallied at 18.5 million cases globally on Wednesday , is pushing more facets of life into the virtual realm .
Better-than-expected quarterly results late Tuesday from Dow component and entertainment and theme park giant Walt Disney Co . /zigman2/quotes/203410047/composite DIS -1.05% also helped to fuel bullish sentiment, even though it reported a $3.5 billion loss. The company touted 100 million subscribers on its streaming platforms amid the pandemic and announced that it would be releasing the live-action version of “Mulan,” through Disney+ for $29.99, a new approach to that streaming service.
Separately, Teladoc Health Inc . /zigman2/quotes/207420252/composite TDOC +0.87% and Livongo Health Inc. /zigman2/quotes/213268833/composite LVGO +1.16% said Wednesday they have agreed to merge in a deal valued at $18.5 billion to create a company that can serve a spectrum of health needs, using virtual care.
Choppy market action over the previous few trading sessions is a healthy sign, said Andrew Smith, chief investment strategist of Dallas-based Delos Capital Advisors, in an interview. “The market is sending a very clear signal that it’s trying to rotate into the cyclical economic recovery names.”
Smith thinks back-and-forth between pandemic darlings, like Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN +0.12% and cyclical recovery stories, will continue for some time. “It’s a battle between leading economic indicators and lagging ones,” he said.
In economic news, the final monthly reading of the closely-watched ISM service sector purchasing managers index jumped to a reading of 58.1 in July, beating expectations and signalling stronger economic growth.