U.S. equities ended the session higher on Tuesday and recovered about half the losses incurred on Monday. Tuesday’s market rally was a result of President Donald Trump’s attempt to ready an emergency relief package to battle the economic setback caused by the coronavirus pandemic.
The three major indexes — the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite — closed in the green on Tuesday. The Dow Jones Industrial Average closed at 25,018.16 and the broader S&P 500 reached 2,882.23 after increasing 4.9% each and the tech-laden Nasdaq Composite hit 8,344.25 after adding 5%.
In particular, tech bigwigs such as Facebook (FB - Free Report) , Amazon (AMZN - Free Report) , Apple (AAPL - Free Report) , Netflix (NFLX - Free Report) and Google-parent Alphabet (GOOGL - Free Report) all climbed more than 4.8% on Mar 10.
The fear-gauge CBOE Volatility Index (VIX) declined 15.1% to close at 47.3 on Mar 10. Finally, advancing issues matched decliners almost by a 1-to-1 ratio on the NYSE.
Trump Advocates for Payroll Tax Relief
On Mar 10, Trump began his push for the emergency relief package that is expected to fight the economic slowdown from the fast-spreading disease by meeting with Senate Republicans on Capitol Hill. Trump called for a temporary abolition of payroll taxes, which could cost about $700 billion. The plan challenges both the financial assistance of 2008 and the measures of economic stimulus that followed the financial crisis.
Trump finally called for the fiscal stimulus measures after downplaying the disease’s impact in the United States for weeks. Lawmakers and administration officials applauded the effort although members from both parties opposed the payroll tax plan. Lawmakers speculate the emergency relief package could eventually be included in a broader parcel which encompasses sick pay, unemployment benefits and food assistance, The New York Times reported.
Trump proposed a range of economic stimulus measures during the meeting on Tuesday, which comprised of targeted assistance for worst-hit businesses such as airlines and cruises. But Trump’s primary agenda appeared to be a reduction in the payroll tax to 0% through the end of this year.
Airlines Cut Capacity to Limit Costs
Airlines worldwide moved to cut capacity and pull back costs on Mar 10, amid mass cancellations and flying almost empty planes over long distances. As of Tuesday, at least 116,000 people globally were affected by the flu-like virus. Several airlines said Tuesday that they were taking the measures in a bid to boost liquidity and save cash, with some air carriers agreeing to new borrowing facilities.
Delta Air Lines, Inc. (DAL - Free Report) said that the airline is deferring $500 million of capital spending, holding up $500 million of pension funding and cancelling share buybacks. United Airlines Holdings, Inc. (UAL - Free Report) withdrew its financial guidance for the first quarter and admitted that it expects to incur losses.
Shares of Delta Air Lines and United Airlines rose 4.5% and 12.4% respectively on Tuesday. Both the stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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