'New York Stock Market Surges' on Calls for Air Support... Fed Signals Expansion of Asset Purchases (Comprehensive)

Trump Spurs Sentiment Reversal Amid Calls for Airline Support Bill
Fed Minutes: "Without Additional Stimulus, Q4 Growth Slows... Asset Purchases May Expand"

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The U.S. stock market, which had plunged the day before following President Donald Trump's announcement of a halt in the stimulus bill agreement, rebounded strongly within a day. It is interpreted that President Trump's mention of support for airlines and other stimulus measures had a positive impact. The Federal Reserve's (Fed) indication of a possible expansion of asset purchases also stimulated investor sentiment.

On the 7th (local time), the Dow Jones Industrial Average rose 1.91% to close at 28,303.46, the S&P 500 increased 1.74% to 3,419.44, and the Nasdaq rose 1.88% to 11,364.60.

CNBC reported that this phenomenon was due to President Trump's separate tweet after announcing the halt of the stimulus bill agreement, demanding Congress immediately approve $25 billion in airline payroll support and a $135 billion Paycheck Protection Program (PPP) for small businesses. President Trump also urged Congress to pass a bill to provide $1,200 in cash payments to the public.

President Trump's tweet boosted airline stocks. Delta Air Lines rose 3.5%, United Airlines 4.5%, and Boeing 3.1%, all climbing together.

Major tech stocks showed recovery despite the U.S. House of Representatives releasing a report emphasizing the need for antitrust regulation. Apple rose 1.7%, Amazon 3.5%, and Microsoft 1.9%.

Tesla rose 2.7%, buoyed by CEO Elon Musk's statement that 500,000 vehicles would be delivered by the end of the year. Netflix surged 6%.

Chris Larkin, an analyst at E*TRADE Securities, explained, "This is neither the first nor the last time the market reacts to Trump's tweets. Yesterday's market plunge is an example of the volatility that can be seen ahead of the election."

Edward Moya, an analyst at OANDA, explained, "The stock price rise on this day reflected the market's expectation that Democratic presidential candidate Joe Biden's victory would lead to more stimulus measures."

The minutes of last month's Federal Open Market Committee (FOMC) meeting released that day showed that Fed officials left open the possibility of expanding or changing asset purchase policies, which was also positive. After the FOMC minutes were released, the New York stock market extended its gains.

Bloomberg News reported that officials hinted at an expansion of the asset purchase program at the November FOMC meeting. According to the minutes, "Some participants mentioned that future meetings would further evaluate how the asset purchase program can best support price stability and employment expansion." This was interpreted as a reference to the asset purchase expansion that the market had been expecting.

With the U.S. government delaying additional stimulus bill agreements, this can be seen as the Fed proactively responding to market expectations through asset purchase expansion. The Fed is currently purchasing $120 billion worth of U.S. Treasury or mortgage-backed securities monthly to supply liquidity.

The next FOMC meeting will be held from November 4 to 5, the day after the presidential election.

According to the minutes, following Fed Chair Jerome Powell's emphasis on the need for additional stimulus bills the day before, Fed officials also formed a consensus on the necessity of further stimulus.

The officials said, "Most experts assume that an additional fiscal package related to the pandemic will be approved this year," adding, "If the new package fails, fourth-quarter growth will slow faster than expected."

Fed officials noted, "Many members pointed out that if the size of future fiscal support is significantly smaller or implemented much later than expected, the recovery speed may be slower than anticipated." They warned, "The absence of additional fiscal support will worsen economic difficulties for minority groups and low-income households."

On the day, West Texas Intermediate (WTI) crude oil closed at $39.95 per barrel, down 1.8% ($0.72) from the previous day. Gold closed at $1,890.80 per ounce, down 0.9% ($18).

This content was produced with the assistance of AI translation services.