By Geoffrey Smith
Investing.com -- U.S. stocks continued to rally Tuesday morning, as markets took heart from reports that the U.S. Congress will agree a ‘phase 3’ package of measures to support the economy through the Covid-19 pandemic.
By 10:57 AM ET (15:57 GMT), the Dow Jones Industrial Average was up 1,352 points or 7.3%. The S&P 500 was up 6.4% and the Nasdaq Composite was up 5.5%. The Nasdaq has performed the best of the three major indices since the Covid-19 outbreak exploded outside of China, losing only 19% in the last month.
On Capitol Hill, House Speaker Nancy Pelosi told reporters that there is "real optimism" that an agreement can be reached within the next few hours. And Senate Majority Leader Mitch McConnell said a stimulus package deal was "on the five yard line," very close to going through.
President Donald Trump had earlier again tweeted his impatience, saying that the passage of the next support bill was essential to get the U.S. back to work.
"Congress must approve the deal, without all of the nonsense, today. The longer it takes, the harder it will be to start up our economy. Our workers will be hurt!" Trump said. The package has been stalled for two days amid Democratic resistance to its provisions for bailouts of large businesses on what they say are too easy terms, with not enough transparency.
Reassurance on the next round of fiscal stimulus is also allowing markets to focus on the far-ranging implications of the measures announced on Monday by the Federal Reserve. The Fed has now offered an almost unconditional backstop to most classes of debt in the U.S. capital markets, having unveiled facilities to support commercial mortgages and corporate bonds, municipal bonds and money-market funds and small-business lending, in addition to its expanded purchases of government and agency debt.
The scale of the impact on the economy from Covid-19 is quickly becoming apparent. The composite purchasing managers index for the U.S. published by IHS Markit fell to its lowest ever level in March at 40.5, a level that indicates sharp contraction. Markit's PMI for the euro zone, published earlier, had also fallen to its lowest ever - a more significant milestone because the latter data series goes back to the last financial crisis (which the U.S. series doesn't).
Premarket releases were again dominated by announcements of companies suspending their outlooks for the year due to the uncertainty, and taking urgent measures to conserve cash. Chevron (NYSE:CVX) stock rose 15.5% after it indicated it won't cut its dividend, although it suspended share buybacks and said it will cut capital spending by 20% this year.
Refiner Phillips 66 (NYSE:PSX) stock rose 4% after similarly slashing spending by 18% but upholding its dividend plans
Intel (NASDAQ:INTC) stock also rose 6.4% after it suspended its buyback program. The chipmaker forecast a "material" impact on sales this year but said its production facilities would stay open, in contrast to many factories with large workforces that have had to close due to public health measures.