Stocks scored their first back-to-back gains Wednesday since a brutal sell-off began five weeks ago, but much of an early rally faded late in the day as a last-minute dispute threatened to hold up a $2 trillion economic rescue package in Congress.
The S&P 500 rose 1.2%, bringing its two-day gain to 10.6%. It had been up 5.1% earlier in the day as Congress moved closer to approving the plan to provide badly needed aid to an economy that has been ravaged by the coronavirus. The market is now down nearly 27% since setting a record high a month ago.
Many on Wall Street say they don’t think stocks have hit bottom yet, but optimism rose after the White House and Senate leaders announced an agreement on the aid bill early Wednesday. A vote had been expected in the Senate by the end of the day, but then some lawmakers balked at the proposed bill.
Senators Tim Scott, Ben Sasse and Lindsey Graham said that they found a “drafting error” in the legislation that could give employers incentives to lay off employees. Afterward, Sen. Bernie Sanders said he would put a hold on the bill unless the three Republican senators dropped their objections to it.
Investors were anxiously waiting for the aid in the rescue package, which lawmakers hope will help blunt the blow to the economy as businesses shut down to slow the spread of the coronavirus.
“They're hitting on all the right elements of what the U.S. economy needs during the shutdown to bridge itself to the other side to open up economic activity,” said Darrell Cronk, chief investment officer of Wells Fargo Wealth and Investment Management.
But even optimists say the package provides just the second leg of three that markets need to regain lasting confidence. The Federal Reserve and central banks are also offering tremendous aid by cutting interest rates and supporting lending markets, but investors say they need to see the number of new infections peak and begin to decline before they can feel comfortable knowing how deep the looming economic downturn will be.
“There's a lot of bad news, there's very little tangible good news and there's a lot of uncertainty in between,” said Jack Ablin, chief investment officer at Cresset.
“It's too early to call a bottom because there's way too much uncertainty,” said Tony Rodriguez, head of fixed income strategy at Nuveen.
“The bottom implies it's not going lower, and I don't think that,” he said. “For it to become a bottom, you would need to see much better news coming out on the health care side of this.”
On Wednesday, the S&P 500 was down as much as 1.6% in the morning before it turned decisively higher. It ended the day up 28.23 points to 2,475.56. The Dow Jones Industrial Average rose 495.64 points, or 2.4%, to 21,200.55. It had been up more than 1,300 points before the rally faded. The Nasdaq swung from a gain of 3.4% to a loss of 0.5% as it dropped 33.56 points to 7,384.30.