Stocks rallied for a second consecutive day Wednesday on news the Senate is close to voting on an historic $2 trillion relief package aimed at shoring up an economy grappling with the effects of the coronavirus pandemic.
- The S&P 500 gained 1.13%
- The Dow Jones Industrial Average tacked 2.33%
- The Nasdaq Composite fell 0.45%
- In the “can you believe it” category, Boeing (NYSE:BA) was easily the best-performing name in the Dow today, gaining 26.62%.
The stimulus package under consideration by the Senate includes $500 billion in loans and grants for larger companies, cities and states with $25 billion of that sum allocated for passenger airlines — a major source of revenue for Boeing.
Boeing itself is likely to be on the receiving end of some of Uncle Sam’s largess, as the company has previously said it needs as much as $60 billion to survive. The sticking point here could be the White House’s insisting that companies taking money from the government cap executive pay and cancel buybacks and, perhaps, even fork over some equity.
The relief package also contains $100 billion explicitly dedicated to hospitals and healthcare providers and while it’s not immediately clear how much, if any, of that sum is going to United Healthcare (NYSE:UNH), the stock was also among the Dow’s best performers today.
In late trading, 26 of 30 Dow stocks were higher.
Nike Offers Coronavirus Insight
After the close of U.S. markets Tuesday, Nike (NYSE:NKE) reported fiscal third-quarter numbers, becoming one of the first major companies to deliver results for a period in which the COVID-19 outbreak was an issue. Expect much more of the same in the coming weeks.
Nike said it earned 53 cents a share on sales of $10.1 billion while Wall Street expected earnings of 58 cents on revenue $9.8 billion. That revenue beat, undoubtedly a surprise in the current climate, could be a sign that Nike’s efforts to bolster online sales are taking shape.
The company said it’s starting to see signs of a recovery in China as 80% of its stores there are reopened. Don’t expect all of the earnings reports coming over the next several weeks to be this strong, but Nike is showing investors it’s possible for companies, even those with deep dependence on the Chinese market, to weather the coronavirus storm.
It cannot be ignored that the recent rally by American Express (NYSE:AXP) is reaching epic proportions and that JPMorgan (NYSE:JPM) is impressing over the past two days as well. However, companies with credit card exposure — a big source of revenue for both AXP and JPM — are not out of the woods simply because of two strong days of price action.
With concerns that the COVID-19 outbreak will create significant near-term job losses, market observers are fretting that some customers will simply stop paying credit card bills to conserve cash. A similar scenario was seen during the financial crisis when banks had to write off almost $90 billion worth of bad credit card loans.
More Oil News
With the commodity still locked in a bear market and economic activity dwindling, calling demand into question in the process, job losses in the energy patch could be coming.
Rystad Energy is forecasting as many as 1 million job cuts in the global energy space as oil prices remain low and as producers look for ways to trim expenses.
Bottom Line on the Dow Jones Today
Some challenges are bound to emerge over the near-term, namely the search for catalysts now that the stimulus package is a done deal and investors reconciling how much of the last two days’ gains are attributable to short covering.
Fortunately, some market observers see equities moving higher after the full slate of bad news is digested.
“But this is not 2008. The coronavirus shock is not one caused by a crisis in the core of the financial system and spreading to the rest of the economy,” said BlackRock in a recent note. “The economy is on much stronger footing and the financial system is much more robust. In fact, policy measures and safeguards put in place since 2008 have only strengthened the financial system.”
Todd Shriber has been an InvestorPlace contributor since 2014. As of this writing, he did not hold any of the aforementioned securities.