ETFs To Gain As Wall Street Cheers US Stimulus Package

Investors seem to be welcoming the huge U.S. stimulus bill. As a result, the major U.S. indices rallied Thursday. The Dow Jones Industrial Average gained 6.4%, followed by the 6.2% and 5.6% rally of the S&P 500 and Nasdaq Composite, respectively. Notably, this was the first three-day rally of the U.S. equities since February 2020. In fact, the Dow Jones has officially re-entered the bull market, with a three-day surge of 21% (read: Dow's Best Day Since 1933: Top Stock Gainers of the ETF).

The mammoth U.S. stimulus package aims at sending direct payments and jobless benefits, support the struggling small businesses, improvise healthcare systems and help the affected states by providing financial assistance (read: ETFs to Gain as New US Stimulus Package Gets a Nod).

The package allocates roughly $500 billion for backing loans and support to companies. It also has set aside $50 billion for loans to support the massively-hit U.S. airlines industry, as well as around $150 billion to help the state and local governments. The plan will commit more than $350 billion to aid small businesses. Moreover, around $130 billion will be channeled to hospitals and other health-care providers for equipment and supplies. Notably, the Democrats have won nods in favor of imposing some restrictions on corporations that would be eligible to gain loans or investments from the Treasury Department.

Lower- and middle-income Americans are entitled to direct payments of $1,200 for each adult, as well as $500 for each child. In addition, a four-month extension has been approved for the unemployment insurance. The benefits from the unemployment insurance will be raised by $600 weekly and eligibility would be broadened to include more workers.

Fed’s Backing

The Federal Reserve announced new initiatives on March 23 to support the markets and combat the coronavirus pandemic. Its actions aim at supporting households, businesses and the U.S. economy with continuous flow of credit. The central bank plans to create a Secondary Market Corporate Credit Facility, in order to combat the pandemic-led crisis. The Fed cannot own more than 20% of any one ETF or 10% of individual corporate bonds.The Federal Reserve has also said that it would buy $375 billion in Treasury securities and $250 billion in mortgage securities this week, and the purchases of Treasury and mortgage securities that it approved a week ago are unlimited, per an article  published on Wall Street Journal (read: All-Out Fed Support: Buy Highly-Rated Corporate Bond ETFs).

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