U.S. stocks closed near their highest levels of the day, boosted by word of what a federal stimulus package might look like and news of the Federal Reserve's latest effort to keep markets running smoothly.
The central bank said it will buy significant amounts of commercial paper, the short-term loans on which businesses rely for funding to pay bills and other expenses. The Fed did the same thing during the Great Recession and ended up buying about $350 billion worth of these loans, or about 20 percent of this market.
The Trump administration said on Tuesday that it was proposing a massive stimulus package to prop up the economy that could include cash payments to Americans. US Treasury Secretary Steven Mnuchin said the administration would allow a 90-day, penalty-free deferral of tax payments of up to US$1 million for individuals and US$10 million for companies. The package would be mostly focused on adding liquidity to the economy through a payroll tax cut or other mechanism. Some US$50 billion would be directed to helping the airline industry.
Treasury Secretary Steven Mnuchin also announced that the White House was looking at giving direct cash payments to Americans as part of an $850 billion stimulus package, which the administration hopes will stanch the economic free fall caused by the coronavirus.
The Fed has also been slashing borrowing costs moving a key interest rate to near zero on Sunday and pumping hundreds of billions of dollars into the banking system to keep credit flowing.
Markets have been gyrating for weeks on increasing fears over the pandemic. From restaurants to airlines, employers have been crushed by a sudden halt in their business as governments order tough measures to keep people apart in an effort to stem the spread of the coronavirus.
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