Is It More Stimulus?

By Nicholas Jasinski |  Wednesday, March 4

Stimulating. U.S. markets' volatile stretch continued today. A sizable dose of monetary policy easing on Tuesday was met with a shrug by investors, who sent stocks falling after the Federal Reserve's surprise announcement. But a comparatively minuscule fiscal measure today was enough to send the market soaring.

Stocks opened up only slightly this morning—thank a strong showing by former vice president Joseph R. Biden on Super Tuesday for that. Insurers and other health-care industry shares were the biggest beneficiaries.

But stocks really took off after news came in the afternoon that Congressional negotiators had settled on $8.3 billion in spending meant to combat the growing novel coronavirus outbreak in the U.S. The House and Senate will reportedly vote on the deal this week.

The spending package includes funds intended for vaccine research; for purchases of masks, tests, and other medical supplies; and for states and cities to fight the virus. It also designates funding to help other countries combat the outbreak outside the U.S. A previous emergency funding plan announced by the Trump administration last week was for $2.5 billion.

While $8.3 billion isn’t much on a larger-than $21 trillion economy, if it slows the spread of Covid-19, the positive impact can be much more significant.

Following the Federal Reserve’s emergency interest rate cut on Tuesday, both monetary and a modicum of fiscal policy have now moved to support the U.S. economy this week. That won't cure people sick with a virus or mend broken supply chains—but it can do a lot on the margins to restore fearful investors' confidence in the trajectory of the U.S. economy.

The S&P 500 ended the day up 4.2%, the Nasdaq Composite gained 3.8%, and the Dow Jones Industrial Average closed up 1173 points, or 4.5%.

U.S. Treasury yields, meanwhile, continued their record-breaking fall. The yield on the 10-year U.S. Treasury note—which declines as the price rises—fell to just 0.994%, an all-time low.