Stocks drop after Trump punts stimulus
Stocks dropped on Wall Street Tuesday after President Donald Trump ordered a stop to negotiations with Democrats on a coronavirus economic stimulus bill until after the election.
The S&P 500 index slid 1.4 percent after having been up0.7 percent prior to the president’s announcement, which he made on Twitter about an hour before the close of trading. The late-afternoon pullback erased most of the benchmark index’s gains from a market rally a day earlier.
In a series of tweets, Trump said: “I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major stimulus bill that focuses on hardworking Americans and small business.” He also accused House Speaker Nancy Pelosi of not negotiating in good faith.
The comments from the president came just hours after Federal Reserve Chair Jerome Powell urged Congress to come through with more aid, saying that too little support “would lead to a weak recovery, creating unnecessary hardship for households and businesses.”
Optimism that Democrats and Republicans would reach a deal on more stimulus ahead of the Nov. 3 elections had helped lift the stockmarket recently. Now, investors face the prospect that more aid may not come until next year, after the new Congress is seated, said Willie Delwiche, investment strategist at Baird.
“This isn’t just pushing it off until after the election, this realistically is pushing it off until spring,” Delwiche said. “I don’t think this is just a one-day financial markets reaction. This really goes to the health of the recovery.”
The S&P 500 fell 47.66 points to 3,360.97. The Dow
Jones Industrial Average dropped 375.88 points, or 1.3 percent, to 27,772.76. It had been up by more than 200 points. The Nasdaq composite lost 177.88 points, or 1.6 percent, to 11,154.60. The tech-heavy index had been on pace for a 0.5 percent gain before Trump cut off the stimulus talks.
Small stocks also fell, but less than the rest of the market. The Russell 2000 index of small-cap stocks gave up 4.67 points, or 0.3 percent, to 1,577.29.
“You’re going to see quite a significant drag on growth,” said Gregory Daco, chief U.S. economist at Oxford Economics, a consulting firm. It “would really risk a double-dip recession.”
The stimulus cutoff coincides with a slowdown in hiring, as employers added 661,000 jobs in September, the government said Friday. Thatwas down from1.5 million in August and 1.8 million in July.