What’s happening: The Dow Jones index plunged 200 points on Tuesday despite the Congress passing the long-awaited coronavirus aid package.
What happened: Markets cheered the US government’s approval of a $900 billion pandemic relief stimulus and President Donald Trump is expected to sign the bill into law shortly. Trump expressed concern, however, around a delay in the deployment of funds.
Why it matters: After several months of negotiations, the US Congress finally attached the massive $900 billion package to a $1.4 trillion legislation to provide funds to the government till September. Treasury Secretary Steven Mnuchin said that Americans can expect to receive their checks in the coming days.
The recent package comprises of higher unemployment benefits, direct payment checks worth $600, higher loans to small businesses and several other provisions to stimulate the US economy.
Investors were a tad worried after Trump’s comments late Tuesday around the bill being unsuitable and a “disgrace.” The President urged lawmakers to make amendments to the bill’s contents, mainly around the allocation of direct payment checks. However, Trump did not threaten to veto the stimulus bill, although his stance may result in a delay in the clearance of the package.
Markets also focused on the announcement of US GDP growth of 33.4% in the third quarter, although consumer confidence declined for the second consecutive month in December.
Meanwhile, covid-19 cases continued to rise sharply, with the country recording around 215,400 new cases and 2,600 deaths per day, according to a seven-day average.
With just a few trading days remaining for 2020 to end, equity investors may be taking profits given the sharp gains made by the stock market for the year. The S&P 500 has gained over 14% year to date, while the Dow Jones index has added more than 5%. With tech stocks being the main beneficiaries of stay-home orders, the Nasdaq 100 has surged around 43% year to date.
Profit taking and concerns over a delay in the stimulus package resulted in pressure on Wall Street stocks. The S&P 500 declined 0.2% to settle at 3,687.26, while the Dow tumbled 200.94 points to end the day at 30,015.51 on Tuesday. Travel-related shares traded lower amid concerns over a new strain of covid-19 virus found in the UK.
The Nasdaq 100 bucked the trend, however, and hit another record high on Tuesday, driven by a rise of around 3% in Apple’s shares following reports of the company working on self-driving vehicles. The tech-laden index settled higher by 0.5% at 12,807.92.
What to watch: Investors await a basket of economic reports from the US, including personal income, personal spending, durable goods orders, initial jobless claims, consumer sentiment and new home sales. US personal income is expected to decline 0.3% in November, while spending is estimated to decline 0.2%. New orders for manufactured durable goods, which rose 1.3% in October, are projected to increase 0.5% in November. Initial jobless claims are likely to increase to 890,000 in the latest week. The University of Michigan's consumer sentiment index is expected to improve to 81.3 in December, from 76.9 in November, while new home sales is projected to decline 0.3% in November.
Markets will keep an eye on President Donald Trump signing the bill to provide the much-needed financial support to the American economy.