S&P 500 Edges Up as Investors Await Stimulus Deal

The S&P 500 climbed Wednesday as investors scrutinised lawmakers’ progress on the stimulus package after new data showed a rebound in retail sales.

The broad US stock market index rose by 0.1%, while the Nasdaq Composite, which is highly technology-driven, added 0.4%. Dow Jones’ industrial average fell by 0.2%, or about 58 points.

The data released on Wednesday shows that US retail sales fell 1.1% in November compared to the previous month, as restaurants, department stores and car dealers showed a sharp drop in sales. The decline in November, together with a revision that slightly reduced sales in October, put an end to several months of growth in retail spending after the sharp decline earlier in the year due to the massive store closures caused by the pandemic.

The weakness of the report could increase the attention paid to the negotiations in Washington on another aid package for the coronavirus. Congressional leaders agreed on Wednesday to a deal worth about $900 billion that is expected to include a new round of direct payments to households, the Wall Street Journal reported. In addition, the package should include an extension of unemployment insurance.

The approach of Tuesday’s stimulus package strengthened sentiment and helped the S&P 500 to break through a four-day loss.

The hope of a new stimulus package was the final catalyst for a market recovery that will raise the S&P 500 index by 15% this year, despite the economic downturn caused by the coronavirus pandemic.

Elements in the package should support consumer spending, said James Ragan, director of wealth management research at D.A. Davidson.

This… will likely lead to better GDP growth in the first quarter of 2021 than we would have achieved without the stimulus measures, he said.

According to investors, the market has largely neglected urgent economic issues, such as the increase in coronavirus cases and new measures for the blocking chain. The introduction of the Covid 19 vaccine this month and the prospect of wider distribution of the vaccine next year have ensured that the restrictions will be lifted, leading to a strong economic recovery.

Markets are currently trying to focus on the Garden of Eden in this immediate period, which is a vaccinated population, said James Athey, investment manager at Aberdeen Standard Investments.

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On Wednesday, the Federal Reserve will publish its latest economic forecasts and make recommendations for monetary policy.

Photo:

Liu Jie/Zuma Press

Investors will receive more information about the state of the economy when the Federal Reserve releases its latest policy statement and economic forecast on Wednesday afternoon. The fund managers will monitor any new guidelines for the duration and pace of the continuation of the asset purchase programme.

If interest rates remain so low for so long, if central banks really support the market and use all the firepower at their disposal comfortably, it’s not so bad for equity markets, says Altaf Kassam, head of investment strategy at State Street Global Advisors in Europe.

Mr Kassam warned that any problems hindering the deployment of the vaccine in the coming weeks, such as unexpected side effects or logistical problems, could dampen market sentiment.

There will be roadblocks on the road that could stir the stock markets again, he said. But we believe the trend will be reversed next year, he added.

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Abroad, the Stoxx Europe 600 index rose by 0.8%. Surveys of purchasing managers show that the European economy gained momentum in the first weeks of December as governments relaxed some restrictions in the services sector and industrial production continued to increase. The companies have been given the prospect of widespread use of effective vaccines by 2021 and have been cutting jobs at the slowest rate since the start of the pandemic.

In Asia, the majority of stock market indices ended in a positive way. Hong Kong’s Hang Seng Index rose almost 1%, while Japan’s Nikkei Index closed with 0.3%. The Shanghai Composite Index was relatively flat.

Legislators working on the Coronavirus bill face two challenges: Supporting national and local authorities and protecting accountability. Gerald F. Seib of the WSJ explained why these issues are important and what a compromise might look like. Photo: Drew Angerer/Getty Images

Email Misha Frankl-Duval at Mischa.Frankl-Duval@wsj.com and Karen Langley at karen.langley@wsj.com.

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