Stocks rose nicely Wednesday morning after the Senate came to an agreement on the $2 trillion fiscal stimulus plan, which investors were quick to point out is by no means a cure for the economy or Coronavirus.
All three major U.S. indexes were up, with the S&P 500 up almost 2% and the Dow Jones Industrial Average up more than 3%.
Still, money moved into the 10 year treasury bond — the yield dipped to 0.81% — which may work to help ease financial conditions, a dynamic Wall Street has said is becoming apparent in the corporate bond market. Lower treasury yields may encourage investors to take incremental risk in corporate bonds, which the Federal Reserve has tried to support.
As for the fiscal spending plan, here were key parts of the reported plan:
- More than $1,000 of cash will be disbursed to families to keep households liquid for the time being.
- $50 billion of loans will go towards struggling airlines
- $150 billion sent to hospitals
- $350 billion in small business loans
The risk sentiment wasn’t exactly hiding in the market Wednesday, but it was held back by a few sticking points. The virus will last a long time and the need for more stimulus isn’t gong away any time soon.
Two concerns of Jasper Lawler, head of research at London Capital Group are "The virus spread just gets out of hand and/or 2. The stimulus isn’t enough to give the economy a shot in the arm after being laid comatose in lockdown.”
Aberdeen Standard Investments’ Senior Global Economist James McCan said, "Whether this package ultimately is enough depends in large part on how long the lockdown lasts.”
Rick Swope, senior director of investor education at E*Trade said, "investors shouldn’t be discouraged if the market does give back some or all of Tuesday’s move. This market still faces challenges from the coronavirus and its economic fallout, so there are bound to be false starts."
Also, money does not grow on trees, even for the government. “Investors know that the US government and Congress have probably hit the higher limit of whatever support they could possibly mobilize to reverse the investor sentiment,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “The US government and the Fed has got everybody’s back. Yet who’s got their back?”
The answer, according to some, is that the government will print money, running the minimal risk of inflation.
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