Stock futures plunge after stimulus hopes are crushed by Trump

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U.S. equity futures fell on Tuesday after President Donald Trump called off stimulus talks until after the November election.Dow futures fell 100 points. The S&P 500 and Nasdaq 100 futures contracts fell 0.53% and 0.5% respectively.

As part of regular trading on Tuesday, the Dow Jones Industrial Average closed 375 points lower after Trump tweeted that the White House halted talks with Democrats on a second coronavirus stimulus deal. Earlier in the session, stocks rebounded in hopes that there would be a second back-up plan to support markets as the coronavirus outbreak rages on.”I have asked my representatives to stop negotiating until the end of the election, when, immediately after my victory, we pass a major stimulus bill that focuses on American workers and small businesses,” Trump said in a tweet Tuesday.

The S&P 500 lost 1.4% and the Nasdaq Composite fell 1.57% on Tuesday.

“It’s so disruptive,” Washington political strategist Tom Block told Fundstrat to CNBC. “There is no way around the president. My opinion is that it is negative for the market. ”

Some on Wall Street have speculated that Trump’s move was just a negotiating tactic, while others have speculated that the president really doesn’t think the economy needs another $ 2 trillion. in tax expenditures.

Federal Reserve Chairman Jerome Powell said on Tuesday that the economy needed more aggressive fiscal and monetary stimulus for an economic recovery which he said still has “a long way to go.”

Powell said the lack of support could “lead to a weak recovery, creating unnecessary hardship for households and businesses” and thwart a rebound that so far has progressed faster than expected. “On the other hand, the chances of doing too much seem, for now, to be less,” added Powell.

“President Powell has said we need more stimulus, and that goes against the advice of the Chairman of the Federal Reserve and the markets don’t really like to go against the advice of the chairman of the Federal Reserve. the Federal Reserve… I wouldn’t. let’s say it’s over for good, but I would say it’s a very negative sign and probably pushes it until the end of the election, ”Block added.

Cleveland Fed Chairman Loretta Mester said later Tuesday that the end of stimulus talks means that the economic recovery will be “much slower” than initially expected.

The Federal Open Market Committee will release the minutes of its September meeting at 2 p.m. ET on Wednesday. The FOMC took no action on interest rates in September, leaving them close to zero.

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– with reporting from CNBC’s Pippa Stevens.

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