NEW YORK — 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.
GOP Sens. Tim Scott, Ben Sasse and Lindsey Graham demanded changes, saying the legislation as written “incentivizes layoffs” and should be altered to ensure employees don’t earn more money if they’re laid off than if they’re working. Complicating the standoff, Sen. Bernie Sanders of Vermont said he would block the bill unless the conservatives dropped their objections.
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 other 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 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.
Investors are also still waiting to see the details of Washington’s plan, which will include direct payments to most Americans and aid for hard-hit industries. It’s unclear when the House of Representatives could vote on the plan.
With widening swaths of the economy shutting down and layoffs mounting, economists are sure a steep drop-off is coming. They’re forecasting a report on Thursday will show a record number of Americans filed for unemployment benefits as layoffs sweep the country. What’s unsure is how long it will last.
That uncertainty has led to wild swings in the stock market over the last month. The S&P 500 surged 9.4% Tuesday as expectations built that Washington was nearing a stimulus deal. That was a better performance than the index has turned in for 10 of the last 20 full years.
But the market has also had a couple days within the last few weeks that packed entire years’ worth of losses, including one drop of 12% and another of 9.5%. The last time the S&P 500 had a back-to-back gain was Feb. 12, a week before the index set its record high.