Day Traders Diary

10/20/20

The major averages closed higher after House Speaker Nancy Pelosi signaled Democrats and the White House were making progress in negotiations for a new fiscal stimulus deal. The Dow Jones Industrial Average closed up 113 points higher, or 0.4%. The 30-stock average was briefly up more than 300 points. The S&P 500 gained 16 points or 0.5% and the Nasdaq Composite advanced 0.3%.

Pelosi gave the Trump administration 48 hours on Sunday to reach a deal on new aid before the Nov. 3 election. However, she said on Tuesday about the 48-hour deadline: "It isn't that this day was a day that we would have a deal, it was a day that we would have our terms on the table to be able to go to the next step."

Stimulus negotiations have hung over the market for months after the main provisions from the CARES Act expired at the end of July. Since then, job growth has slowed but consumer spending has continued to recover. However, some indicators have shown that savings built up by the massive economic relief package are starting to run out.

House Democrats have passed two additional relief bills that found no traction in the Republican-controlled Senate, which is moving to vote on a $500 billion targeted relief package later this week. The most recent bill from House Democrats was $2.2 trillion, while the counteroffers from the White House have crept up to about $1.9 trillion in recent weeks.

Recapping the moves in the Treasury market, selling in longer-dated maturities drove yields higher on the prospects that a large stimulus package would spur economic growth/inflation. The 2-yr yield was flat at 0.15%, while the 10-yr yield rose four basis points to 0.80%. The U.S. Dollar Index fell 0.4% to 93.08.