The S&P 500 Index slipped 1.4% after rising 0.7% before the president’s announcement, which he made on Twitter about an hour before the market closed. The late afternoon pullback erased most of the benchmark’s gains from a stock rally the day before.
The president’s comments came just hours after Federal Reserve Chairman Jerome Powell urged Congress to provide more help, saying that insufficient support “would lead to a weak recovery, creating unnecessary hardship for households and businesses.
“It’s not just about pushing it until the end of the election, it realistically means pushing it back until spring,” Delwiche said. “I don’t think this is just a one-day reaction from the financial markets. This really goes to the health of the recovery. ”
The S&P 500 lost 47.66 points to 3360.97. The Dow Jones Industrial Average fell 375.88 points, or 1.3%, to 27,772.76. He had increased by over 200 points. The Nasdaq composite lost 177.88 points, or 1.6%, to 11,154.60. The tech-intensive index had advanced 0.5% before Trump halted stimulus talks.
Small stocks also fell, but less than the rest of the market. The Russell 2000 small-cap index fell 4.67 points, or 0.3%, to 1,577.29.
Stocks had drifted between small gains and losses for much of the day before gaining momentum in the late afternoon, and then Trump’s tweets put the market in reverse.
Wall Street had hoped Democrats and Republicans could overcome bitter partisanship on Capitol Hill and provide more aid to the economy, which has been plunged into recession by closures linked to the coronavirus pandemic. Reports on the economy have been mixed recently, as some regions show a slowdown after the expiration of additional unemployment benefits and other stimulus packages previously approved by Congress.
Powell has repeatedly called on Congress for further help, saying the Fed cannot support the economy on its own, even with interest rates at historically low levels. “The expansion is still far from complete,” Powell said in a speech to the National Association for Business Economics, a group of business and academic economists.
Without further stimulus, analysts expect growth to slow significantly in the last three months of the year. Last month Goldman Sachs cut its fourth-quarter growth forecast to just 3% year-on-year, down from the previous forecast of 6% as they no longer expected an aid package be approved. That would leave the US economy 2.5% smaller at the end of 2020 than a year earlier, even after a strong rebound in the July-September quarter.
“You’re going to see a pretty big drag on growth,” said Gregory Daco, chief US economist at Oxford Economics, a consulting firm. It would “really risk a double dip recession.”
The cut in the stimulus coincides with a slowdown in hiring, as employers added 661,000 jobs in September, the government said on Friday. This figure was 1.5 million in August and 1.8 million in July.
Tuesday’s sales were widespread, led by tech stocks and companies that rely on consumer spending. Utilities were the only winners among the 11 sectors of the S&P 500.
A report released on Tuesday showed that U.S. employers advertised slightly fewer job postings in August than the month before. But the number was nonetheless better than economists expected.
Several major challenges await the markets. Chief among them is the still raging pandemic, as clearly illustrated by Trump’s diagnosis of COVID-19 and his hospital stay. The concern is that an increase in infections could cause governments to reinstate some of the restrictions they imposed on businesses earlier this year, which plunged the economy into a recession.
“We are on the eve of earnings season and people are reasonably undecided as to whether the correction that started in September should continue,” said Julian Emanuel, chief equity and derivatives strategist at BTIG.
The upcoming election also means a host of uncertainties over tax rates and business regulation, as tensions between the United States and China continue to simmer.
The yield on the 10-year Treasury bill fell to 0.75% from 0.78% on Monday night. While still very low, the yield has generally risen since dropping nearly 0.50% in early August.
The European and Asian markets closed higher.
AP Business writers Christopher Rugaber and Elaine Kurtenbach contributed.