President Trump Changes Stimulus Tune, Stocks Reverse Course

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Stocks rose Wednesday, after having taken a beating Tuesday the minute President Trump tweeted he is ordering his White House negotiators to stop speaking with Congress about fiscal stimulus until after the election. He reversed that word Wednesday and stocks rallied.

The S&P 500 rose 0.8%, with tech stocks helping bring the market higher, although most sectors were solidly in the green. The Nasdaq rose 1%. The 10-Year Treasury yield rose to 0.78% and has been finding a new home at roughly that level this week as inflation expectations firm up and investors grow comfortable with the V-shaped recovery. Yields rise when prices fall.

Trump said he may consider alternative stimulus measures, which may include a paycheck protections program. That would be key for employment and consumer spend, as small businesses, not fully reopened, would be better able to retain employees.

In a broad rally, consumer discretionary, and oil stocks rose roughly 1%, while bank stocks rallied more than 1%, enjoying an expanding yield curve, key for bank profitability. United Airlines  (UAL) - Get Report rose more than 5%.

Excluding Tuesday’s afternoon rout in the market, risk sentiment has been strong this week. One key input to that sentiment: virus cases, after rising in September, have leveled off of late. New daily virus cases in the U.S. were recently 35,000, where they were in early September before they rose to 50,000, according to data from Johns Hopkins. This means small businesses can potentially reopen faster.

Stocks, though, have a tall order ahead of them: power through potential virus headwinds, any election ballot-counting delays and a slow fiscal stimulus picture. Many strategists and wealth managers note the stimulus needs to come — and come quickly. Each day with no stimulus is a day closer to bankruptcy for many businesses and even households. 

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