After sleepless nights of tense negotiations, the Senate came to an agreement on a US$2 trillion stimulus deal and it is planned to pass legislation today. Dow futures leaped more than 500 points on the news, expressing a positive sentiment on the bill.
Early Wednesday, the Democrats and Republicans were able to come to terms on a massive stimulus deal as a response to the economic turmoil caused by the coronavirus pandemic. At around 1:00 a.m. ET, Senate Majority Leader Mitch McConnell announced:
At last, we have a deal.
After days of intense discussions, the Senate has reached a bipartisan agreement on a historic relief package for this pandemic.
We’re going to pass this legislation later today.
— Leader McConnell (@senatemajldr) March 25, 2020
The bipartisan agreement comes as state leaders, businesses, hospitals, and individuals are urgently requesting aid for resources needed to combat the pandemic.
Democrats and Republicans finally meet halfway
Senate Minority Leader Chuck Schumer declared that the stimulus bill is “the largest rescue package in American history.”
Despite the optimism expressed by the Democrats earlier this week, their proposal for a “digital dollar” appears to have been scrapped but has been replaced by a better provision. Schumer noted that the updated bill will cover every American for four months.
He also promised to add oversight on loans to be assigned to an inspector general and a designated board responsible for checking if loans are fair. In addition, the deal will allocate US$150 billion to states and localities battling the spread of the coronavirus.
Stocks, Treasury yields spike in reaction to the stimulus deal
Following Tuesday’s historic rally, futures surged over 500 points as the White House and Senate reached a deal on the stimulus bill.
Surprisingly, the U.S. government debt prices were slightly lower following the recent developments. Some investors are speculating that the stock market is about to see a big bounce soon despite the economic damage inflicted by the coronavirus.
Jeffrey Gundlach, the founder of DoubleLine Capital LP, suggests that the S&P might bounce soon.
I can see the S&P 500 making it to around 2700 on this snap back.
— Jeffrey Gundlach (@TruthGundlach) March 25, 2020
However, CNBC’s Jim Cramer had a different take on the Dow Jones. Telling investors to be “patient,” and with supporting input from Tom DeMark, head of DeMark Analytics, he advised:
“The charts … suggest that the Dow and the S&P 500 came close to bottoming, but there might need to be a bit more capitulation before the decline exhausts itself […] I think he makes a great point, so don’t let today’s move make you too exuberant. We still have a lot more bad news to process.”
In the crypto market, the price of Bitcoin saw an uptick in reaction to the agreement on the coronavirus stimulus package. At the time of writing, Bitcoin is trading at around $6,600, according to CoinMarketCap.
Once the stimulus bill reaches President Donald Trump’s desk today, it is likely that the markets will have another electrifying reaction once he signs it.