The U.S. stock market rally could be in for a rude awakening Tuesday after a source at the White House confirmed that President Trump was undecided about backing a new budget deal proposed by congressional leaders. The Dow surged by as much as 317 points earlier in the session on reports that a new deal was imminent.
All of Wall Street’s major indexes reported big gains after the open. The Dow Jones Industrial Average surged 287 points, or 1.2%, to 25,340.29. The gains reflected a strong pre-market session for Dow futures as investors pounced on news that a new budget deal was being finalized.
Twenty-eight of 30 index members reported gains through the late-morning, with Caterpillar Inc. (CAT), Merck & Co (MRK) and Intel Corp (INTC) leading the way higher.
The large-cap S&P 500 Index climbed 1.1% to 2,739.39, with ten of 11 primary sectors adding to the rally. Shares of financials and consumer discretionary companies were the biggest gainers percentage-wise. A total of seven sectors rose more than 1%.
The technology-focused Nasdaq Composite Index advanced 1.3% to 7,405.43.
Small-cap stocks were also part of the rally, with the Russell 2000 climbing 0.9% to 1,533.00.
Despite the gain, there was some hesitation on the part of traders that the latest stock market rally was overdone. The CBOE Volatility Index, a fear index that usually trades inversely with the S&P 500, declined only slightly on Tuesday. It was last down 3.7% to 15.38.
Reports that congressional leaders were finalizing a tentative deal to avoid a second partial government shutdown appear to be premature after a White House source confirmed that President Trump hadn’t decided on whether to support the bill.
“No decision has been made,” the White House official said, as reported by U.S. News.
While it’s not entirely clear what the proposed deal looks like, Republican Senator Richard Shelby on Monday said that the House-Senate Committee established last month had agreed in principle to pay for increased border security. That agreement was reached at the end of the previous shutdown, which was the longest in U.S. history. Sources say that the agreement may include funding for up to 55 miles of new fencing on the southern border.
A final agreement is expected late Wednesday, which would give lawmakers in both chambers enough time to vote on the legislation. Any deal would need to be signed by the president in order to be finalized.
On Jan. 25, Trump and congressional leaders agreed on a stopgap spending bill that would reopen government for three weeks. The stopgap will expire on Friday.
Trump has threatened to declare a national emergency if Congress refuses to grant $5.7 billion in new border security. A national emergency would allow the president to divert funds from the Department of Defence toward his new security wall.
Featured image courtesy of Shutterstock. Chart via TradingView.
Last modified: July 2, 2020 8:16 PM UTC