Dow Edges Higher Ahead of Powell Address, New Stimulus Talks

Stimulus hopes are fueling risk appetite on Wall Street. Markets were more subdued on Tuesday as investors awaited comments from Fed Chair Jerome Powell. | Image: Spencer Platt/Getty Images/AFP

• The Dow Jones Industrial Average rallied by as much as 96 points on Tuesday.
• Federal Reserve Chairman Jerome Powell will deliver a speech on the economic outlook Tuesday morning, where he is expected to address the need for more fiscal policy.
• Investors are hopeful that Congress will pass new stimulus relief before the November election.

The Dow and broader U.S. stock markets were under pressure on Tuesday, as investors awaited new signs that deadlocked Congress was making progress on the stimulus front.

Dow Rallies; S&P 500, Nasdaq Fall

Wall Street’s major indexes opened higher, extending their biggest gain in almost four weeks, before backtracking later in the session. The Dow Jones Industrial Average rose by as much as 96 points before paring gains.

The broad S&P 500 Index of large-cap stocks edged down 0.1%, with losses mainly concentrated in communication services and discretionary shares.

Meanwhile, the technology-focused Nasdaq Composite Index declined 0.2%.

A measure of implied volatility known as the CBOE VIX remains elevated, suggesting investors are concerned about the direction of the stock market over the next month. The so-called “fear index” is currently trading above 28 on a scale of 1-100, where 20 represents the historic average.

Stimulus Hopes Build

Shifting stimulus expectations drove massive gains in U.S. equities on Monday, as investors continued to expect breakthroughs in the coming weeks.

Stimulus hopes are building amid reports that House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin are bridging the gap on a new spending bill. The two leaders met for an hour on Monday and are planning another call later today.

Federal Reserve Chairman Jerome Powell is expected to address the stimulus deadlock in a speech at the National Association of Business Economics on Tuesday.

Marshall Gittler, head of research investment at BDSwiss Group, told clients:

The main point of interest will be what he has to say aboutCongress’ failure to come up with another stimulus package… He and his colleagues have been quite vocal about the limits of monetary policy and the need for further fiscal support.

President Trump offered Democrats a $1.6 trillion stimulus bill last week. While it was swiftly rejected, both sides are narrowing the gap after months of no progress.

House Democrats last week passed a $2.2 trillion stimulus bill despite GOP opposition. Watch the video below: