Dow Rallies 340 Points, Nasdaq Closes At Record High Ahead Of Key Stimulus Meeting

Topline

Stocks rallied on Tuesday in anticipation of a late-afternoon meeting among key lawmakers to discuss additional fiscal stimulus, pushing major indexes to new highs despite lingering concerns over a worsening near-term outlook for the pandemic.

Key Facts

The Dow Jones Industrial Average ended the day up nearly 338 points, or 1.1%, closing just under the index’s high on December 4, while the S&P 500 and tech-heavy Nasdaq both jumped about 1.3%, marking a new record high for the latter.

Meanwhile, the Russell 2000, the benchmark for small-cap stock performance, shot up 2.4%, pushing year-to-date gains to nearly 18% as small business relief continues to play a key role in ongoing stimulus negotiations.

Four top Congressional leaders—including House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Mitch McConnell (R-Ky.)—scheduled a Tuesday afternoon discussion regarding the next federal coronavirus aid package and the omnibus federal budget bill, a development that pushed markets higher after a lukewarm start to trading.

Shares of European apparel companies H&M and Zara-parent Inditex both sank on Tuesday morning after the firms reported significant sales declines in recent weeks, of 22% and 19%, respectively, as the pandemic forces retailers to once again shutter locations around the world.

On the deal front, drug-maker Eli Lilly, which climbed 6% on Tuesday, said it was acquiring Prevail Therapeutics in a mostly cash transaction valued at more than $1 billion, sending shares of Prevail, a gene therapy company with several drugs in its pipeline, soaring 80%.

European markets were mixed on Tuesday, with the United Kingdom’s FTSE 100 edging down 0.3% and Germany’s DAX Index climbing 1.3%, while East Asian markets (such as Hong Kong’s Hang Seng Index, down 0.7%) fell after lukewarm economic data from China.

Crucial Quote

“New York Governor Andrew Cuomo and New York City Mayor Bill de Blasio’s warnings on Monday about another full NYC lockdown unnerved investors… but the 4 p.m. EST conference call scheduled between Pelosi, McConnell [and others] certainly helped sentiment,” noted Adam Crisafulli, the founder of Vital Knowledge Media, on Monday, adding that the market has already largely priced in expectations of stimulus package in the realm of $750 billion passing before the end of the year. , referring to the crop of mostly tech stocks (such as stay-at-home favorites Netflix, Zoom and Peloton) that have dominated the pandemic stock market but lagged in recent weeks in anticipation of widespread coronavirus vaccination.

Key Background

A few stimulus plans are on the table as lawmakers look to tack on relief to a $1.4 trillion spending bill that’s currently due before this weekend. But lawmakers have been unable to agree on key issues, such as federal relief for state and local governments. In a Tuesday interview on CNBC’s Squawk Box, Warren Buffett urged lawmakers to act quickly to provide emergency relief for small businesses, suggesting that millions of them have become “collateral damage” in the government’s efforts to control the pandemic’s spread through restrictions on economic activity, including lockdown orders. 

Tangent

In what could be a grim sign for much of the broader market, the International Energy Agency on Tuesday warned it could take months for coronavirus vaccines to start helping the oil market recover from tanking demand during the pandemic; the agency downgraded its industry forecast for 2021 as a result.

What To Watch For

Big earnings later in the week include Rite Aid, Accenture and FedEx on Thursday, as well as Carnival Cruise Line, Nike and Olive Garden-parent Darden Restaurants on Friday.

Further Reading

Warren Buffett On Stimulus Gridlock: ‘Just Renew The PPP And Get Us To The End Of The Tunnel’ (Forbes)

U.S. Households’ Net Worth Hits Record $123.5 Trillion As Stocks Boom, But Debt Is Also Surging (Forbes)

AMC, World’s Largest Movie Theater Chain, Raises $100 Million Lifeline, But It Needs $750 Million To Survive Next Year (Forbes)

Airbnb Skyrockets 120% In IPO, Valuation Blows Past $100 Billion–More Than Marriott, Hilton And Hyatt Combined (Forbes)

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