The markets ended the week on a curiously upbeat note Friday, as hopes for COVID-related fiscal stimulus improved only to encounter new hurdles.
The Wall Street Journal reported that the White House is planning a $1.8 trillion stimulus counteroffer to House Speaker Nancy Pelosi, whose latest bill sits at $2.2 trillion. But any agreement that materializes would need to pass the Senate, and that's "unlikely" to happen before Election Day, according to Senate Majority Leader Mitch McConnell.
Yet, the Dow Jones Industrial Average finished the day with modest gains, rising 0.6% to 28,586.
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Why the optimism despite the slim chances for a rescue bill in the near-term? Brent Schutte, chief investment strategist for Northwestern Mutual Wealth Management Company, provides some insight:
"If stimulus doesn't materialize in the coming weeks, we don't believe it would be an absolute market-breaker, given many Americans have already emerged from the economic valley," he says. "Of course, additional stimulus would help pull more Americans out of the valley, and we still think it's likely to come after the election no matter who is in office."
Other action in the stock market today:
- The Nasdaq Composite punched ahead by 1.4% to 11,579, putting it within striking distance of its previous highs.
- The S&P 500 advanced 0.9% to 3,477.
- The Russell 2000 was a bit more muted, improving 0.6% to 1,637.
What Else Is Driving This Market?
Stimulus banter has dominated the headlines, but it's not the only hand on the wheel.
For instance, semiconductor stocks were busy on Friday amid reports that Advanced Micro Devices (AMD, -3.9%) is in "advanced talks" to purchase rival Xilinx (XLNX, +14.1%) for more than $30 billion. And as we discussed in our free A Step Ahead newsletter, dealmaking can be a signal of a bubbling industry -- just ask investors in the sports betting industry.
Corporate earnings will also come into focus next week. You can check out a fuller calendar here, but JPMorgan Chase (JPM), United Airlines (UAL) and other blue chips will start to give us more info about the recovery's progress. They'll certainly have a low bar to clear; FactSet's John Butters reports that analysts are looking for a 20.5% decline in the S&P 500's quarterly earnings, which would be the second-largest drop since Q2 2009.
As these various drivers pull and push on the market, where's the best place to stash sidelined cash?
Wall Street's "smart money" says to invest it in the Dow. We routinely pick through 13Fs to see what billionaires and big-money hedge funds are buying, and they're particularly enamored with blue chips, especially those in the Dow 30. Here, we look at eight Dow stocks that are popular among the billionaire set, including investors such as Warren Buffett, Chris Hohn and James Hambro.
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