US Government Reaches Deal On Stimulus Package: 5 Top Picks

In an unprecedented move to boost the U.S. economy amid the coronavirus-induced crisis, the U.S. government and the Senate finally reached an agreement on a massive stimulus package. The deal was reached early on Wednesday. Notably, the White House and the Senate had failed to reach a consensus two times previously this week.

On Mar 24, Wall Street reacted with enthusiasm as market participants expected the deal to come to fruition. Consequently, the Dow rallied 2,112.98 points or 11.37% — its biggest single-day gain after 1933. Moreover, percentage-wise, yesterday's rally was the fifth-best in the blue-chip index's history.

Meanwhile, the market's benchmark — the S&P 500 — jumped 209.93 points or 9.38%. This marked the broad-market index's best single-day rally after October 2008. The tech-laden Nasdaq Composite also advanced 557.18 points or 8.12% — its best day since Mar 13.

Unprecedented Fiscal Stimulus

In the first hour of Mar 25, the U.S. government and Senate lawmakers reached an agreement to inject $2 trillion of stimulus to boost the U.S. economy amid the coronavirus-induced turmoil. The package will include $250 billion for direct payments to individuals, $367 billion for loans to small businesses, $250 billion in unemployment insurance benefits and $500 billion in loans for distressed companies. Per the deal, hospitals would receive around $150 billion.

Per the stimulus package, most adults would receive direct payments of $1,200, married couples would get $2,400 while children would get $500 in checks. Loans given to small businesses may be waived if the companies don’t make any changes to payroll.

Fed Injects Huge Monetary Stimulus

On Mar 23, Fed chairman Jerome Powell announced that the central bank will buy assets “in the amounts needed” to ensure smooth market functioning and effective transmission of monetary policy. Earlier, the Fed limited the asset purchase program by $700 billion — $500 billion in Treasury securities and $200 billion in mortgage-backed securities. Further, the central bank also unveiled a new lending program worth $300 billion.

Earlier this month, the Fed lowered the benchmark lending rate by 1.5% in two tranches, which reduced the Fed fund rate to 0-0.25%. Moreover, the central bank reduced reserve requirement for banks to zero and lowered the price of U.S. dollar swap arrangements in collaboration with five other central banks.

Our Top Picks

Wall Street's rally of Mar 24, however, doesn’t ensure the bottoming out of the market or the beginning of recovery, especially when coronavirus-induced crisis continues to ravage the global and U.S. economy. Nevertheless, unprecedented fiscal and monetary stimulus will definitely enhance the moral of market participants. This, in turn, will aid investors reap rewards in the long term.

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At this stage, investment in large-cap stocks that have established business model and strong brand name with favorable Zacks Rank will be prudent. We narrowed down our search to five such stocks each of which are member of any of the three major stock index's and sports a Zacks Rank #1 (Strong Buy). You can seeZacks Investment Research