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'Stock market up big': Wall Street recovers more losses on hopes of a stimulus

U.S. stocks surged higher Monday on reports that negotiators were making progress on a new stimulus package, adding to earlier gains driven by President Donald Trump’s improved health.

The Dow Jones industrial average closed up about 465 points, or 1.7%, to 28,148 – territory it hadn’t seen since mid-September. The Standard & Poor’s 500 index rose 60 points, or 1.8%, to 3,408. And the tech heavy Nasdaq climbed 257 points, or 2.3%, to 11,332.

Trump tweeted that he planned to leave Walter Reed medical center early Monday evening, bolstering earlier reports that he's improving in his battle with COVID-19. About two hours later, the president boasted the market closing on a high saying, "STOCK MARKET UP BIG."

"It's all about uncertainty," says Brad McMillan, chief investment officer at Commonwealth Financial Network, adding that Trump's fight with the potentially deadly disease stoked fears that an election that already faces possible delays could be drawn out further. "As that fear starts to fade, buyers are coming back in."

Meanwhile, House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin were making progress toward new stimulus legislation that could provide relief to millions of unemployed Americans, and more funding for small businesses and struggling airlines, according to news reports.

Pelosi and Mnuchin spoke for about an hour Monday and didn't reach a deal but plan another phone call Tuesday, Pelosi spokesman Drew Hammill tweeted.

Late last week, Pelosi said she asked airlines to hold off on more than 30,000 furloughs while negotiations continued.

“Airlines see stability at least,” J.J. Kinahan, chief market strategist of TD Ameritrade. “That’s what everybody is excited about.”

Also pushing up stocks: Ten-year Treasury yields have moved higher the past week, raising the prospect of wider interest margins and earnings for banks, Kinahan says. Shares of Citigroup, Bank of America and Wells Fargo were up sharply Monday.

A man wearing face mask walks past a bank's electronic board showing the Hong Kong share index at Hong Kong Stock Exchange Monday, Sept. 28, 2020.
A man wearing face mask walks past a bank's electronic board showing the Hong Kong share index at Hong Kong Stock Exchange Monday, Sept. 28, 2020.

Doctors described Trump's health as improved over the weekend, and the president waved to supporters from the back seat of an SUV outside Walter Reed medical center. Still, his condition remains clouded in uncertainty.

The lift to stocks follows through on a comeback that helped markets cut their losses on Friday, after Trump’s condition became publicized. Stocks initially tumbled as the jolt of uncertainty raised concerns that a White House victory for Democrat Joe Biden would mean higher taxes and tighter regulations for companies, which could drag down their profits. But analysts said a Democratic sweep of the election could also raise the probability of a big government support plan for the economy, something that investors have been clamoring for since jobless benefits and other stimulus Congress approved in March expired.

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The market’s moves on Monday and late Friday suggest investors are anticipating either a large stimulus effort or the increased likelihood of a “blue wave,” said Yousef Abbasi, global market strategist at StoneX.

Stocks got an immediate lift Friday afternoon after Pelosi told airline executives to stop the furloughs of tens of thousands of workers because aid for the industry was “imminent,” either as a stand-alone effort or as part of a wider rescue package. A stand-alone bill for airlines failed to advance in the House on Friday, but hopes remain for a larger effort.

Over the weekend, Trump tweeted from the hospital that the country wants and needs more economic stimulus. “Work together and get it done,” he said on Saturday.

A day later, Pelosi said that the two sides are making progress, but they still haven’t reached a breakthrough. “It just depends on if they understand what we have to do to crush the virus,” she said in an interview on CBS.

Encouraging data

A report on Monday said growth for the nation’s services industries last month was stronger than economists expected. It’s an encouraging piece of data, but it follows a string of mixed reports that have shown some areas of the economy slowing since Congress’ last round of aid expired.

“Our dark expectations in the aftermath of the COVID-19 crisis are not coming through,” said Scott Knapp, chief market strategist at CUNA Mutual Group. “The pace of the improvement is slowing, but it’s still upward.”

He expects the upcoming election to throw some more volatility into the markets, but not much as investors seem somewhat indifferent to the potential outcome. He said a key signal to that indifference was the market’s muted response to the news that Trump had contracted COVID-19.

“It’s pretty difficult to overstate how understated the market’s reaction was,” Knapp said.

Shares of Regeneron rose 7.1% after Trump received an experimental drug from the company that supplies antibodies to help the immune system fight the virus.

Trump on Friday also began a five-day course of remdesivir, a Gilead Sciences drug currently used for moderately and severely ill patients. The drugs work in different ways – the antibodies help the immune system rid the body of virus, and remdesivir curbs the virus’ ability to multiply.

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Gilead rose 2.3%.

MyoKardia, a biopharmaceutical company, surged 57.8% after Bristol Myers Squibb said it would buy the 8-year-old company for $13.1 billion, or $225 per share in cash.

On the losing side was DraftKings, which fell 5.1%. It and some of its existing investors are selling 32 million shares of the company’s stock after it nearly sextupled in 2020.

In Asian trading, Japan’s Nikkei 225 gained 1.2%, South Korea’s Kospi jumped 1.3% and Hong Kong’s Hang Seng rose 1.3%.

Fujitsu President Takahito Tokita apologized Monday for the breakdown last week in the Tokyo Stock Exchange’s trading system, which the Japanese company had developed. Speaking during an online webinar, he promised to work with the exchange to prevent a recurrence of the malfunction in Fujitsu’s Arrowhead system, which caused all trading to be halted in Tokyo on Oct. 1.

By Friday, trading resumed after the problem was fixed.

In Europe, Germany’s DAX returned 1.1%, and France’s CAC 40 rose 1%. The FTSE 100 in London added 0.7%.

The yield on the 10-year Treasury rose to 0.76% from 0.70% late Friday.

Contributing: The Associated Press

This article originally appeared on USA TODAY: Dow, markets claws back more of its losses on stimulus hopes