Stocks rose Wednesday even though President Donald Trump indicated he wanted more direct payments to households in the current fiscal-stimulus bill. The silver lining for investors: Congress can easily override any veto. Also, upbeat economic news in the form of lower-than-expected jobless claims lifted stocks.
The Dow Jones Industrial Average rose 114.32 points, or 0.38% to close at 30,129.83. The S&P 500 rose 2.75 points, or 0.08% to end at 3,690.01, and the Nasdaq Composite fell 36.80 points, or 0.29% to close at 12,771.11.
The biggest gainer on the S&P 500 was Diamondback Energy (ticker: FANG), up 8.5%. The price of crude oil rose 2% to $48 a barrel and on a day in which small-cap stocksâ€”more economically sensitive than large capsâ€”outperformed, small-cap oil names had quite a day. The Russell 2000, an index of small caps, rose 1%. Other smaller oil companies popped, with Occidental Petroleum (OXY) stock up 6%, and Apache (APA) stock rising 5%.
The S&P 500 was weighed down by sluggishness in big tech, which had a rough day as investors moved into cyclical stocks. Amazon.com (AMZN) stock, for instance, fell 0.7%.
President Trump criticized the $900 stimulus bill congress passed this week, saying that the $600 direct payments to households should be raised to $2,000. It seems he may not approve of a bill that doesnâ€™t meet his expectations. But investors are still confident the bill will go throughâ€”and soon. The bill would provide cash to small businesses, which can then rehire workers when Covid-19 vaccines are widely distributed, keeping the economic recovery alive.
With a Senate vote of 92-6 for the spending bill, the Senate is highly likely to override a potential veto, Raymond James Washington Policy analyst Ed Mills wrote in a note. Others on Wall Street are on the same wavelength. â€œThere are sufficient votes to override a veto from President Trump,â€ wrote David Bahnsen, chief investment officer of The Bahnsen Group, in emailed remarks to media.
Stocks seemed to trade totally on the assumption that the economic trajectory remains high and that the recovery from the pandemic remains intact. Not only did small caps outperform, but value stocks, which are tied to the current economy growth stocks, carried the market. The Vanguard S&P 500 Value exchange-traded fund (VOOV) rose 1%, while its growth counterpart (VOOG) fell 0.5%.
Initial jobless claims last week beat estimates, coming in at 803,000, while economists had expected 875,000. The actual result was also lower than the previous weekâ€™s reading of 892,000, even as lockdowns persist. Investors have largely been looking past poor economic data, as stimulus and vaccines underpin a positive outlook for 2021.
â€œThis breaks a multi-week trend of increasing initial claims,â€ wrote Citigroup economists in a note. â€œThe drop is an encouraging sign that any weakness may be contained.â€
Write to Jacob Sonenshine at firstname.lastname@example.org