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Dow Claws Back as Wall Street Warms up to Joe Biden

Last Updated September 23, 2020 2:08 PM
Francois Aure
Last Updated September 23, 2020 2:08 PM
  • The Dow Jones recovered from triple-digit losses to trade flat on Monday afternoon.
  • Positive vaccine and stimulus news helped lift the Dow out of the red.
  • Bank of America predicts Joe Biden could actually be a positive for the U.S. stock market.

The Dow Jones dove toward losses of nearly 200 points on Monday, before a confluence of positive news thrust the stock market bellwether into positive territory.

Another batch of optimistic vaccine developments joined with progress in stimulus negotiations to deliver the Dow an immediate bump.

And a new report from Bank of America gave the stock market a longer-term boost by making the surprising bull case for Joe Biden.

Stimulus Headlines Push Dow Jones Into Positive Territory

While the Dow Jones barely scraped into positive territory, the other major U.S. stock market indices secured substantial rallies.

Minutes before the closing bell, the Dow had gained 67.35 points or 0.25% to trade at 26,739.3.

dow chart today
After falling more than 150 points, the Dow clawed back into positive territory. | Source: Yahoo Finance 

The S&P 500 jumped 1.01% to 3,257.41, while the Nasdaq surged 2.66% to 10,782.45.

With no significant U.S. economic data for Wall Street to focus on, the pandemic and politics dominated investors’ attention today.

First came optimistic vaccine headlines, as Pfizer and the University of Oxford both reported positive results in recent tests .

Then Treasury Secretary Steven Mnuchin speculated that he was confident the U.S. would have an “emergency” vaccine by the end of the year.

Of course, bears argued it was a troubling sign for bulls that stocks didn’t rise higher on the news:

Stock Market, Dow Jones, Vaccine
Bears noted that positive vaccine headlines didn’t give the Dow the sort of boost we’ve become accustomed to seeing. | Source: Jim Bianco via Twitter 

Wall Street hopes a vaccine is on the way in the short-term, but investors pray stimulus will be on the way even sooner.

Congress returned to work today following a two-week recess, with just days remaining until enhanced unemployment benefits expire.

President Donald Trump met with top congressional Republicans today  in preparation for negotiations with Democrats.

One potential sticking point is Trump’s threat to veto the bill if it doesn’t include a payroll tax cut.

Going back to the first round of stimulus, Wall Street has always known there would have to be more on the way.

An unexpected stalemate could disrupt stock prices, but this appears unlikely since both sides seem committed to getting a deal done.

BofA: Biden Could Be a ‘Perverse’ Win for U.S. Stock Market

Another weekend, another set of rough polling for Donald Trump. 

There’s still time for the president to turn things around, but the clock is ticking.

Many economists are nervous about the impact that a Biden presidency could have on the stock market . Bank of America bucked this trend in a recent note.

BofA Head of U.S. Economics Michelle Meyer predicts that Trump’s exit from the White House  would erase a degree of geopolitical uncertainty.

Meyer says that given present economic conditions, even Wall Street bugaboos like higher taxes and minimum wage hikes could “perversely benefit stocks”:

The big surprise under a Dem sweep would be a rally. But positives include the potential for unleashed capex amid less tariff uncertainty. Even hiking [the] minimum wage and raising taxes of the wealthy could perversely benefit stocks, as discount retail is >6x luxury retail’s US public market cap.

A “blue wave” could further lead to a unified response to the pandemic if it festers into 2021.

With the significant majority of U.S. states currently experiencing an R rate above 1 , it’s not a stretch to imagine bulls construing a less haphazard federal response  as a positive for the Dow.

Dow 30: Tech Giants Surge as Apple & Microsoft Dominate

It was all about the mega-caps in the U.S. stock market today, and that was no less true in the Dow 30  than the S&P 500 and Nasdaq.

The Dow didn’t benefit from Amazon’s massive boost (AMZN is not in the DJIA), but Apple (+2%) and Microsoft (+4.4%) helped carry the index into the green.

While the overall Dow Jones rallied, a majority of its member stocks suffered declines. Dow Inc. fell 3%. Walgreens, Exxon, Chevron, and 3M each slid around 2%.