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President Trump accused House Speaker Nancy Pelosi of not negotiating in good faith thereby asking his representatives to stop any discussions with stimulus bills until the Presidential Elections.
On Tuesday, October 6, the U.S. stock market indices made a sharp reversal in the final hours of trading as President Donald Trump asked his officials to stop further negotiations on the coronavirus stimulus. This comes just a day after Trump’s discharge from the hospital after he was diagnosed positive for COVID-19. On the same day after this news from Trump, the Dow Jones Industrial Average (INDEXDJX: .DJI) tanked 375 points or 1.3% closing at 27,772.76. Similarly, the S&P 500 (INDEXSP: .INX) tanked 1.4% and the Nasdaq Composite (INDEXNASDAQ: .IXIC) also tanked 1.5%. The market plunge came at 3:00 pm after Trump announced halting the stimulus talks.
On Monday, House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin discussed the stimulus distribution in an hour-long call. The two were to again discuss the stimulus on Tuesday, however, Trump pressed the pause button. Trump blamed Pelosi for not negotiating in “good faith” thus rejecting the requests by the Democrat States.
…request, and looking to the future of our Country. 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. I have asked…
— Donald J. Trump (@realDonaldTrump) October 6, 2020
The Airline stocks which were eagerly waiting for the stimulus aid tanked faster. American Airlines Group Inc (NASDAQ: AAL) stock tanked 4.5% while United Airlines Holdings Inc (NASDAQ: UAL) tanked 3.65%. Technology stocks were also under pressure with each among the FAANG group losing 2%.
On Monday, stocks and, consequently indices, including Dow, rose on the hopes of faster stimulus package release after Trump was released from the hospital. Wall Street was hoping for some additional economic relief, however, the election uncertainty has halted things as of now.
It’s Not America First for Trump, Says Pelosi
House Speaker Nancy Pelosi accused President Trump of calling off the negotiations. She also said that Trump was putting “himself first at the expense of the country”. Pelosi further added:
“Walking away from coronavirus talks demonstrates that President Trump is unwilling to crush the virus, as is required by the Heroes Act. He shows his contempt for science, his disdain for our heroes – in health care, first responders, sanitation, transportation, food workers, teachers, teachers, teachers and others – and he refuses to put money in workers’ pockets, unless his name is printed on the check”.
However, Federal Reserve chairman Jerome Powell has requested for another financial aid. He said that it is the wrong time for policymakers to pause any further stimulus. The Fed chairman cited some progress made in businesses and job creation and called for continued monetary support. Powell said that calling off any further monetary support can “lead to a weak recovery, creating unnecessary hardship for households and businesses”. He further added:
“By contrast, the risks of overdoing it seem, for now, to be smaller. Even if policy actions ultimately prove to be greater than needed, they will not go to waste. 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.”
It will be interesting to see how the market reacts with less than one month to the Presidential Elections. Several analysts have pointed for another major correction in the offing.