By Yasin Ebrahim
Investing.com – The Dow neared session highs on Thursday underpinned by a wave of optimism that Federal Reserve and Congress will continue to rescue the economy at a time when nationwide containment measures have brought business activity to a halt and sparked a record jump in unemployment claims.
The Dow jumped 4.97%, or 1,053 points, the S&P 500 surged 4.83% and the Nasdaq Composite rose 4.09%.
With Congress expected to pass a $2 trillion stimulus package and Fed Chairman Jerome Powell reiterating the central bank's pledge to ramp up its bond-buying program, investors are betting big on stocks once again.
In an interview with NBC News earlier Thursday, Powell conceded that the U.S. "may well be in a recession," but the Fed is "working hard" ensure that an eventual recovery will be strong as possible.
"When it comes to lending, we are not going to run out of ammunition,” he added. "That just doesn’t happen."
The pledge from the Fed chief came as Covid-19 infections in the U.S. surged above 75,000, with deaths topping 1,000. The lockdown measures to combat the virus has forced major disruptions across businesses, the effect of which was seen in the weekly initial jobless claims figures, which came in at 3.3 million. Claims hadn't topped 700,000 before.
Industrials, meanwhile, continued to get a lift from Boeing (NYSE:BA), up 14%, as the stimulus bill - expected to be approved by the House – will provide the aviation sector with much-needed fiscal boost.
Financials, led by banking stocks also joined in on the rally even as Treasury yields fell sharply.
JPMorgan (NYSE:JPM), Goldman Sachs (NYSE:GS), and Bank of America (NYSE:BAC) rallied more than 5%.
Lower interest rates are typically a headwind for banks, weighing on net interest margin – the difference between the interest income generated by banks and the amount of interest paid out to their lenders.