By Stephen Culp
NEW YORK, Oct 7 (Reuters) – U.S. stocks rebounded to close sharply higher on Wednesday after incremental stimulus proposals helped investors recover from the shock of President Donald Trump’s announcement on Tuesday that he would halt stimulus talks until after the Nov. 3 election.
Increased risk appetite also resulted in weaker Treasury prices and a steepening yield curve as markets were heartened that at least some fiscal aid measures to help an economy battered by the coronavirus pandemic were still on the table.
While White House Chief of Staff Mark Meadows said he was “not optimistic for a comprehensive deal,” Trump appeared to relent somewhat, urging Congress to pass a $25 billion airline bailout, a move also supported by U.S. House of Representatives Speaker Nancy Pelosi.
In separate Twitter posts, Trump also expressed willingness to approve sending stand-alone $1,200 relief checks to Americans and urged Congress to approve the $135 billion payroll protection program for small businesses.
“Investors grow optimistic when there is any type of stimulus, whether it’s a large package or more discrete,” said Joseph Sroka, chief investment officer at NovaPoint in Atlanta. “There’s interest on both sides in having some kind of stimulus as the election approaches.”
“The most important issue for them is who gets to take credit for it,” Sroka added.
The U.S. Federal Reserve released the minutes from its latest monetary policy meeting, which revealed many members of the Federal Open Market Committee said their economic outlook assumed additional fiscal support, and if a stimulus package from Congress was too small or came later than expected, the economic recovery could be slower than anticipated.
This echoed Fed Chair Jerome Powell’s warning on Tuesday that the economic recovery would slip into a downward spiral if Congress fails to provide additional fiscal