Wall Street jumps on hopes of piecemeal stimulus progress

NEW YORK (Reuters) – Wall Street advanced in a broad rally on Wednesday as investors recovered from the shock of President Donald Trump’s announcement that he intended to halt stimulus talks until after the election, taking heart that incremental aid could be in the offing.

FILE PHOTO: Traders wearing masks work, on the first day of in person trading since the closure during the outbreak of the coronavirus disease (COVID-19) on the floor at the New York Stock Exchange (NYSE) in New York, U.S., May 26, 2020. REUTERS/Brendan McDermid/File Photo

All three major U.S. stock indexes were sharply higher in the aftermath of Tuesday’s late session sell-off prompted by Trump’s tweet.

Trump relented somewhat on Wednesday, saying he backed a more piecemeal approach to delivering pandemic aid, while White House chief of staff Mark Meadows said he was “not optimistic for a comprehensive deal.”

“The market’s trying to read the tea leaves and today it’s saying even if it’s incremental progress, something is better than nothing,” said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Massachusetts.

“The recent action in the market is predicated on success or failure of the stimulus package and to what degree anything will get done before the election,” Keator added. “It’s the topic of the day.”

The U.S. Federal Reserve is expected to release the minutes from its latest monetary policy meeting later on Wednesday.

On Tuesday, prior to Trump halting stimulus negotiations, Fed Chair Jerome Powell warned the economic recovery would slip into a downward spiral if Congress fails to provide additional fiscal aid.

The Dow Jones Industrial Average .DJI rose 423.14 points, or 1.52%, to 28,195.9, the S&P 500 .SPX gained 44.47 points, or 1.32%, to 3,405.42 and the Nasdaq Composite .IXIC added 148.68 points, or 1.33%, to 11,303.28.

European shares were slightly lower as upbeat earnings were offset by uncertainties surrounding the fate of a U.S. stimulus package.

The pan-European STOXX 600 index .STOXX lost 0.14% and MSCI’s gauge of stocks across the globe .MIWD00000PUS gained 0.82%.

Emerging market stocks rose 0.56%. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 0.89% higher, while Japan’s Nikkei .N225 lost 0.05%.

U.S. Treasury prices fell and the yield curve steepened as markets took comfort that at least some stimulus measures were still on the table.

Benchmark 10-year notes US10YT=RR last fell 10/32 in price to yield 0.7718%, from 0.74% late on Tuesday.

The 30-year bond US30YT=RR last fell 26/32 in price to yield 1.5716%, from 1.537% late on Tuesday.

The pandemic relief package impasse, along with a bigger than expected rise in U.S. inventories sent crude prices lower.

U.S. crude CLcv1 fell 2.88% to $39.50 per barrel and Brent LCOcv1 was last at $41.43, down 2.86% on the day.

The dollar was essentially flat against a basket of world currencies as markets reacted to Trump’s willingness to back some stimulus measures.

The dollar index .DXY was flat, with the euro EUR= up 0.27% to $1.1766.

The Japanese yen weakened 0.32% versus the greenback at 105.99 per dollar, while Sterling GBP= was last trading at $1.2907, up 0.23% on the day.

Gold prices gained as uncertainties on coronavirus aid abated.

Spot gold XAU= added 0.5% to $1,886.83 an ounce.

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