Dow plummets 376 points as Trump halts stimulus talks until after election
- US equities plummeted on Tuesday after President
Donald Trumpsaid he would halt stimulus talks until after the November 3 election.
- "I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major
Stimulus Bill," Trump tweeted on Tuesday afternoon.
- Major stock indexes gained in recent sessions on renewed hopes for near-term fiscal relief. Trump's action leaves the economy to trudge onward without support that many economists have deemed essential.
- With election results likely to trickle in over several days, the holdout could last well into next month.
- Watch major indexes update live here.
US stocks tanked on Tuesday afternoon, erasing earlier gains, after President Donald Trump said he would freeze stimulus negotiations in Congress until after the presidential election on November 3.
The Dow Jones industrial average plummeted as much as 1.5%, or 421 points, after the announcement. The benchmark index had risen 0.7% at intraday highs before the tweet.
Major stock indexes had climbed in recent sessions on investors' optimism about a near-term relief bill. The abrupt pause leaves the US economy to recover without fiscal support that many have deemed essential for fueling a timely bounce-back.
"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," the president said in a tweet.
Here's where US indexes stood at the 4 p.m. ET market close on Tuesday:
- S&P 500: 3,360.97, down 1.4%
- Dow Jones industrial average: 27,772.76, down 1.3% (376 points)
- Nasdaq composite: 11,154.60, down 1.6%
As election results are expected to trickle in over several days, the holdout could last well into next month.
House Democrats passed their own $2.2 trillion measure on Thursday. Though the bill garnered no Republican support, House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin have held talks in recent days aiming to reach a compromise.
Hours before Trump tweeted, Federal Reserve Chair Jerome Powell warned of the risks of passing too little relief.
An inadequate fiscal stimulus could give way to a "weak recovery" and create "unnecessary hardship for households and businesses," the central-bank chief said in a Tuesday keynote speech to the National Association for Business Economics. Conversely, he said, the "risks of overdoing it seem, for now, to be smaller," as extraneous stimulus funds would still be put to use.
"The recovery will be stronger and move faster if monetary policy and fiscal policy continue to work side by side to provide support to the economy until it is clearly out of the woods," Powell added.
The market's rapid reaction wiped modest intraday gains. Consumer-discretionary, communication-services, and tech stocks sank the most, while utilities — generally viewed as a defensive play — were the only group to finish higher.
So-called reopening plays including airlines, hotels, and casinos tanked as investors put off hopes for government support. Airlines have said they would lay off tens of thousands of workers should Congress fail to allocate emergency funds for the struggling industry.
On the economic-data front, the US trade deficit widened to its largest since 2006 amid a leap in imports of consumer goods. Trump has repeatedly cited the sum as a gauge of his trade policies' success. Though the deficit narrowed in 2019, the pandemic quickly erased gains and widened it as export activity weakened.
Shares of Social Capital Hedosophia Holdings Corp. III slid after the special-purpose acquisition company, or SPAC, announced a merger with Clover Health in a deal valuing Clover Health at $3.7 billion. The plunge contrasted with Social Capital Hedosophia's last target announcement: When the firm said last month that its second SPAC would merge with Opendoor, the blank-check company's stock launched higher.
Spot gold sank to $1,885.61 per ounce at intraday lows. The tumble erased the recently retaken support of $1,900. The US dollar climbed, and Treasury yields fell.
Oil prices continued to rally after Monday saw futures leap the most since May. West Texas Intermediate crude rose as much as 4.2%, to $40.86 per barrel. Brent crude, oil's international benchmark, jumped 3.8%, to $42.84 per barrel, at intraday highs.
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