Stocks Fall After Trump Dashes Stimulus Hopes

Stocks reverse course in final hour after Trump pours cold water on stimulus talks.

The Dow and broader U.S. stock market declined Tuesday, reversing earlier gains after President Trump told his representatives to end stimulus negotiations until after the election.

All of Wal Street’s major indices finished in negative territory, with the Dow Jones Industrial Average (DIA) falling 377.99 points, or 1.3%, to 27,770.65.

The broad S&P 500 Index (SPY) of large-cap stocks plunged1.4% to close at 3,360.75. The technology-focused Nasdaq Composite Index (QQQ) declined 1.6% to end at 11,154.60.

A measure of implied volatility known as the CBOE VIX (VXX) peaked at 30, where it continued to trade well above the historic mean. The so-called “investor fear index” settled up 6% at 29.65.

Equities are coming off their best session in nearly four weeks Monday on optimism that Congress was inching closer to a multi-trillion-dollar stimulus deal. Federal Reserve Chairman Jerome Powell said Tuesday that a fresh round of fiscal stimulus is needed to avert a bigger economic disaster.

“The expansion is still far from complete,” Powell said in a speech at a virtual conference on Tuesday. “At this early stage, I would argue that the risks of policy intervention are still asymmetric. Too little support would lead to a weak recovery, creating unnecessary hardship.”

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House Democrats passed a $2.2 trillion stimulus deal last week despite GOP opposition. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin are resuming negotiations this week.
The Final Word: With Donald Trump expected to make a full recovery from Covid-19, the presidential campaign is gearing up again. Trump and Biden are scheduled to hold their second debate on Oct. 15 in Michigan.