Dow rallies more than 500 points for its best day since July

U.S. stocks rose sharply on Wednesday after President Donald Trump tweeted support for aid to airlines and other stimulus measures, stoking hope that a smaller aid package could be passed by lawmakers. 

The Dow Jones Industrial Average closed 530.70 points higher, or 1.9%, at 28,303.46. It was the Dow's biggest one-day gain since mid-July. The S&P 500 climbed 1.7% to 3,419.45 while the Nasdaq Composite advanced 1.9% to 11,364.60.

In a series of tweets Tuesday night, Trump urged Congress to approve airline payroll support, saying that money and aid for small business could be paid for with unused funds from the previous stimulus. Trump also pushed for another round of $1,200 stimulus checks for Americans.

"This certainly isn't the first time we've seen the market react to Trump tweets, and it probably won't be the last," said Chris Larkin, managing director of trading and investment product at E-Trade. "The seesaw we've seen since yesterday's plunge is just case and point for the volatility we may encounter as we close in on the election."

"That said, with President Trump's call for aid to airlines, an obviously hard-hit area of the market, traders may be eyeing bullish opportunities in cyclical stocks dependent on a quicker economic recovery—if they can stomach the rollercoaster," Larkin added. 

Shares of United Airlines gained more than 4%. Delta gained 3.5%. Airline stocks also got a boost after a JPMorgan analyst upgraded several companies in the industry. Boeing shares were up 3.2%. Cruise operators — another group that would benefit from the economy reopening — rose broadly. Carnival jumped 5.3%. Norwegian Cruise Line advanced 4.5% and Royal Caribbean gained 2.8%.

"I think what President Trump was saying yesterday was that we're too far apart for a gigantic bill," White House economic advisor Larry Kudlow told CNBC's "Squawk Box." But "a small bill? A targeted bill? ... They were willing to compromise on the [continuing resolution] to keep the government open. Why not do it again?"

Market sentiment also got a boost after Eli Lilly said it was looking for FDA clearance for its coronavirus antibody drug. Eli Lilly shares jumped 3.4%.

The major averages closed sharply lower on Tuesday after Trump tweeted the White House is halting talks with Democrats about a second coronavirus stimulus deal. Earlier in the session, stocks rallied in hopes that there would be a second relief package to prop up markets as the coronavirus outbreak continues.

Bridgewater Associates' Ray Dalio told CNBC's "Street Signs Asia" on Wednesday morning Singapore time that the U.S. president's move is "certainly not a good thing" and will be a "significant negative" on the economy.

"That's ... a lot of money, whatever it would've been," Dalio said, adding that there'll be "a lot of stress" for those who are not going to get the funds.

Meanwhile, Pershing Square Capital Management's Bill Ackman said in a tweet directed at Trump and House Speaker Nancy Pelosi: "Mr. President and Madam Speaker, in that you both agree on the first $1.6T of stimulus, why not immediately fund $1.6T of stimulus and leave the disputed $400B to the outcome of the election? That way, Americans in need can be helped now."

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—CNBC's Pippa Stevens contributed to this report.