Wall Street Set to Open Higher on Hopes of Stimulus Breakthrough

U.S. stocks are set to open higher on Tuesday after a weak session on Wall Street yesterday as Democrat House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin edged towards a breakthrough on a stimulus deal.

Future contracts for the Dow Jones rose 79 points, while futures for the S&P 500 and tech-heavy Nasdaq Composite edged higher into positive territory, reflecting the tentative optimism over a stimulus deal.

In their latest coronavirus stimulus talks, Pelosi and Mnuchin were said to have made some progress on a relief bill, according to Pelosi's office. The pair are planning to speak further on Tuesday.

In a nearly one-hour phone call, they "continued to narrow their differences," the California Democrat's spokesman, Drew Hammill, said in a tweeted statement.

"The speaker continues to hope that, by the end of the day Tuesday, we will have clarity on whether we will be able to pass a bill before the election," he said.

The Speaker and Secretary Mnuchin spoke at 3:00 p.m. today for approximately 53 minutes. In this call, they continued to narrow their differences. The Speaker has tasked committee chairs to reconcile differences with their GOP counterparts on key areas. (1/2)

— Drew Hammill (@Drew_Hammill) October 19, 2020
Tweet from Drew Hammill

On Sunday, Pelosi gave the White House a 48-hour deadline to reach a stimulus deal that could be passed through Congress before the election. She called on the Trump Administration to reconcile the remaining disputes.

Writing to House Democrats on Sunday, the speaker said she was "optimistic that we can reach agreement before the election."

Pelosi added that "we are writing [legislative] language" as talks continue, "so that we are fully prepared to move forward once we reach agreement." However, Republicans in the Senate, pushing for a smaller price tag, are a potential stumbling block for any deal.

Stimulus negotiations have dragged on for several months as the pandemic continues to spread across U.S. states and millions of Americans remain out of work.

Yesterday Wall Street slid into the red with the Dow and S&P suffering their fourth day in five in negative territory. The Nasdaq recorded its fifth consecutive day of losses.

Edward Moya, senior analyst at Oanda, said in a note per Bloomberg: "Risky assets are losing their mojo after disheartening virus updates, countless stimulus banter that will not yield anything until after the election, and as central banks remain stuck in wait-and-see mode.

"The QE for life trade appears like it is not going away anytime soon, but that is not enough of a reason to buy stocks now."

It comes as a succession of central bankers painted a gloomy picture of the economic outlook. Richard Clarida, U.S. Fed vice chair, expressed concern that the domestic economic recovery was likely to take another year at least.

Meanwhile, ECB president Christine Lagarde said that new restrictions in Europe would set back any recovery even further in the absence of new monetary and fiscal stimulus measures.

Nancy Pelosi
Speaker of the House Nancy Pelosi. On Sunday, Pelosi gave the White House a 48-hour deadline to reach a stimulus deal before the election. Getty Images/Drew Angerer