Stocks rose sharply on Tuesday as traders grew more optimistic about Congress passing another economic relief package.
The Dow Jones Industrial Average gained 337.76 points, or 1.1%, to 30,199.31. The S&P 500 advanced 1.3%, or 47.13 points, to 3,694.62, snapping a four-day losing streak. The Nasdaq Composite climbed 1.3%, or 155.02 points, to 12,595.06, reaching a new record closing high.
Apple led the Dow higher, jumping 5% after Nikkei reported the company will increase iPhone production by about 30% in the first half of 2021. All 11 S&P 500 sectors registered gains on Tuesday, led by energy and utilities.
The top four congressional leaders were set to meet at 4 p.m. Tuesday, seeking to reach an agreement on another round of coronavirus aid. House Speaker Nancy Pelosi set up the meeting with Senate Majority Leader Mitch McConnell, Senate Minority Leader Chuck Schumer and House Minority Leader Kevin McCarthy, marking the biggest effort yet to come to a bipartisan agreement.
The lawmakers released a proposal for another round of economic relief on Monday evening, splitting a previous measure into two parts.
The new plan calls for $748 billion in spending for programs that are popular on both sides of the aisle, including small business loans, unemployment insurance, vaccine distribution, education and rental assistance. A second $160 billion bill would include the more contentious areas of business liability protections and financial aid to state and local governments.
"There's been a tug of war between the vaccine news and the virus news. The only tiebreaker that's kept the averages on their way higher seems to be the potential for getting stimulus out of gridlock," said Art Hogan, chief market strategist at National Securities. "It certainly feels like one of the proposals that's on the table ... can go through."
The latest step toward a stimulus deal comes as investors and Americans at large grapple with a bleak near-term outlook but prospects of economic growth and a possible end of the pandemic in 2021.
The first round of shots from the vaccine developed by Pfizer and BioNTech were given in the U.S. on Monday, but the country also passed 300,000 deaths from Covid-19, according to data from Johns Hopkins University. New York City Mayor Bill de Blasio also warned residents that a full shutdown may be needed to protect the city's hospitals.
Luke Tilley, chief economist at Wilmington Trust, said that another stimulus package was needed to keep the economic recovery from stalling before the vaccine can be distributed.
"With the continued rising cases and mass vaccinations still a ways out, we could see some further weakness in jobs and even a flattening where we're not even adding jobs at all ... that's absolutely a possibility for this next jobs report," Tilley said. "And if we were to not get another stimulus package, you're going to have 10 to 11 million people fall off the unemployment rolls right away, and that would hit spending as well."
On Tuesday morning, the Food and Drug Administration said the data on Moderna's coronavirus vaccine met expectations for emergency use, a crucial step before a full approval. If the FDA greenlights the vaccine, it would be the second approved for use in the U.S. behind Pfizer's.
The S&P 500 has gained more than 14% for the year despite the ongoing pandemic, leading some to believe that near-term upside could be limited.
"We may have already gotten a little bit of a Santa Claus rally," David Waddell, chief investment strategist at wealth advisory firm Waddell and Associates. "So normally the markets would accelerate from here into year-end, and they may again, but the run has been such a strong one, I wouldn't be surprised, and actually I'd rather, if the market consolidated its gains a little bit."
— CNBC's Yun Li contributed reporting.
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