By William Watts and Joy Wiltermuth
U.S. stocks ended sharply higher Tuesday, with the Nasdaq Composite reaching a new record, as hopes that Congress would finally pass another package of aid for workers and businesses, along with optimism about the coronavirus vaccine rollout, offset threats of new lockdowns as COVID-19 cases continue to rise.
Investors also were awaiting an update from the Federal Reserve on Wednesday on its bond-buying program to support financial markets and the economy.
Stocks saw a mostly lower finish Monday, with the Dow closing in negative territory after an early push to an intraday record.
Technology and small-cap stocks ended in record territory Tuesday, while House Speaker Nancy Pelosi, D-Calif., invited congressional leaders to meet on Tuesday afternoon to hash out a coronavirus aid package and a government spending plan to avoid a shutdown by the weekend.
“It’s been a slow bleed up,” said David Wagner, portfolio manager at Aptus Capital Advisors, of stock indexes moving higher Tuesday in anticipation of a slimmed down stimulus deal.
“The market always tells you what it’s decided to focus on, and right now it’s solely stimulus,” he said. “It doesn’t matter the size, they just want it passed.”
A bipartisan group of House and Senate lawmakers on Monday proposed a two-part package that would separate the most contentious issues holding up approval from a $748 billion proposal that incorporates widely supported measures, including extended unemployment benefits and aid to business. Thornier issues, including liability protections for businesses and aid to state, local and tribal governments were put into a proposed $160 billion package.
“Although the current proposal is far more modest than the fiscal packages floated earlier in the year (at $700 billion it is only about one third as large) it nevertheless is viewed by the market as better than nothing at a time when many U.S. citizens are on the precipice of homelessness given the contraction of economic activity due to fresh wave of lockdowns,” said Boris Schlossberg, managing director at BK Asset Management, in a note.
If lawmakers leave Washington without a deal, “the policy error could be very costly for the U.S. economy in Q1,” he said.
Meanwhile, the rollout of the vaccine developed by Pfizer Inc. (NYS:PFE) and BioNTech SE (NAS:BNTX) continued, after the first vaccinations were delivered on Monday.
Later this week, a Food and Drug Administration advisory committee will meet to discuss whether Moderna Inc.’s (NAS:MRNA) COVID-19 vaccine candidate should be authorized for use. Data released by the FDA Tuesday showed the vaccine was “highly effective.” Moderna shares fell 5.1% but remain up 652.7% in the year to date.
The U.S. saw more than 1,600 fatalities from COVID-19 on Monday, bringing the death toll to more than 300,400 and the country saw 201,073 new cases on Monday , according to a New York Times tracker . The U.S. has averaged 209,600 cases a day over the past week, up 31% from the average two weeks earlier. There was a record 110,549 COVID-19 patients in U.S. hospitals on Monday, according to the COVID Tracking Project, topping the previous record of 109,298 set a day earlier.
Investors also are awaiting an update from the Federal Reserve after it began a two-day policy meeting Tuesday, its final gathering of 2020.
In U.S. economic news, business activity in New York state expanded only slightly in December, according to the latest survey from the New York Fed released Tuesday. The bank’s Empire State business conditions index slipped to 4.9 in December from 6.3 in the prior month. Economists were expecting a gain to 7.2, according to Econoday. The Empire State index has fallen steadily after hitting 17 in September.
U.S. November industrial production showed a slight 0.4% rise , after a revised 0.9% increase in October.
“Manufacturing’s strong performance this year isn’t likely to be repeated in 2021. An end to the health crisis is slowly coming into view, but less buoyant demand, some lingering Covid-related supply chain disruptions, and less stimulative fiscal policy will constrain manufacturing activity next year,” said Oren Klachkin, lead U.S. economist at Oxford Economics after the Empire State data.
“Additionally, double dip recession risks will continue to run high if Congress doesn’t provide more fiscal relief and the health crisis isn’t over,” he said.