Stocks Rise on Aid Talks as Bonds Drop After Fed: Markets Wrap

(Bloomberg) -- Stocks rose on speculation that lawmakers are getting closer to a stimulus deal aimed at reviving the world’s largest economy. Treasuries fell as the Federal Reserve disappointed some traders who expected changes to the composition of bond purchases.

The S&P 500 notched back-to-back gains after Senate Majority Leader Mitch McConnell said talks about fresh aid are still ongoing and he thinks “we’re gonna get there.” Retailers and technology shares drove the advance in the benchmark gauge amid thin trading volume. The Nasdaq 100 outperformed, while the Dow Jones Industrial Average dropped. Treasuries pared some of its losses, with the yield on 10-year notes remaining below 1%. Bitcoin surpassed $20,000 for the first time.

Read: Powell Busts Out Fed Model to Defend High Equity Valuations

Investors awaited developments on stimulus talks after months of deadlock amid signs the economic recovery is faltering. Lawmakers are rushing to finalize the package in time to attach it to crucial government spending legislation and pass by the end of the week. The virus-related measures are expected to be worth nearly $900 billion. Fed Chair Jerome Powell said the case for fiscal stimulus is “very, very strong.”

“Investors have clearly applauded recent news that legislation is imminent before Congress recesses for the holiday break knowing the Fed will buy every last Treasury that is issued to fund the relief package,” said Danielle DiMartino Booth, chief executive officer of Quill Intelligence in Dallas.

Meanwhile, the first known allergic reaction to the Pfizer Inc. Covid-19 vaccine in the U.S. was reported in Alaska as some snarls began to emerge in the effort to send the shots across the country -- highlighting the daunting challenges ahead for a historic immunization drive.

While enthusiasm for individual U.S. stocks is at an extreme among option traders, the same can’t be said for equity indexes. Option-based indicators compiled by Cboe Global Markets show the contrast. The ratio between stock-specific put and call options closed Monday at its lowest level since April 2000, based on 20-day averages. This shows contracts that rise along with specific stocks are much more in demand than usual. Yet the put-call ratio for index options is near a nine-year high, set Nov. 12. Variant Perception Research highlighted the distinction in a Twitter post Tuesday.

Here are some key events coming up:

• Policy decisions from the Bank of England and central banks in Mexico, Switzerland and Indonesia are due Thursday. Japan and Russia announce decisions Friday.

These are some of the main moves in markets:

Stocks

• The S&P 500 rose 0.2% as of 4 p.m. New York time.
• The Stoxx Europe 600 Index gained 0.8%.
• The MSCI Asia Pacific Index climbed 0.9%.

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%.
• The euro increased 0.3% to $1.2185.
• The Japanese yen appreciated 0.2% to 103.50 per dollar.

Bonds

• The yield on 10-year Treasuries rose one basis point to 0.92%.
• Germany’s 10-year yield gained four basis points to -0.57%.
• Britain’s 10-year yield climbed one basis point to 0.272%.

Commodities

• The Bloomberg Commodity Index increased 0.4%.
• West Texas Intermediate crude rose 0.4% to $47.81 a barrel.
• Gold gained 0.5% to $1,862.88 an ounce.

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