Markets slowly kicked into action Wednesday morning, as investors parsed whether the $2 trillion stimulus package would be able to keep pace with the compounding economic effects of the coronavirus outbreak.
The Dow Jones Industrial Average rose by just 350 points at the opening bell, then gained almost 600 points within the first half hour of the trading session. The S&P 500 was up by 1.7 percent and the Nasdaq notched up gains of 1 percent.
Just one day after the Dow notched its biggest one-day point gain ever in anticipation of the bill’s approval, the blue-chip index slumped overnight, falling by 200 points before rallying slightly Wednesday morning.
The historic deal on emergency economic relief was reached in the Senate in the early hours of Wednesday morning after mammoth negotiations and two failed attempts to get legislation approved. President Donald Trump will “absolutely” sign it if Congress passes it, Treasury Secretary Steven Mnuchin told reporters.
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“In effect, this is a wartime level of investment for our nation,” Senate Majority Leader Mitch McConnell, R-Ky., announced from the Senate floor shortly before 2 a.m. Wednesday. “After days of intense discussions, the Senate has reached a bipartisan agreement on a historic relief package for this pandemic.”
While the exact details of the bill are not yet known, lawmakers indicated Tuesday that it would include roughly $100 billion in assistance for hospitals; $350 billion in assistance to small businesses; $500 billion in aid for corporations, including airline companies and cruise lines, that have been hurt by the outbreak; and about $150 billion for state and local stimulus funds.
Unemployment insurance would also be significantly bolstered and include people who typically do not qualify, such as gig economy workers, furloughed employees and freelancers. The maximum state unemployment benefit has been raised to $600 a week.
The stimulus package is the third round of government emergency action, after Congress approved an $8.3 billion bill for health agencies and a roughly $100 billion bill that includes free coronavirus testing, unemployment benefits and food assistance for affected Americans.
“Elected leaders have now followed the Federal Reserve into ‘whatever it takes’ mode,” said Mark Hamrick, senior economic analyst for Bankrate. “In the days and weeks ahead, economic data will enumerate the devastating financial toll of the crisis threatening lives and livelihoods. Helping to mitigate that impact … should provide a much-needed inoculation of hope for Americans.”
The Federal Reserve has slashed interest rates twice this month as part of emergency action to stimulate an economy ravaged by the coronavirus pandemic, in addition to injecting billions of dollars into the financial system to boost credit flow, backstop businesses and support the dollar.