The highly awaited second stimulus package will probably not happen anytime soon.
At least not before the Election Day, on November 3rd.
This Tuesday afternoon, President Donald Trump tweeted he ordered his team to stop negotiations with Democrats on a coronavirus relief bill until the election and focus on approving his nominee to the Supreme Court, Amy Coney Barrett.
The markets immediately reacted.
The main indexes were previously positive and reversed the course after the President’s comments.
The Dow, which was up more than 200 points before the tweets, lost 376 points or 1.34% at the end of the day.
The S&P 500 and the Nasdaq were also higher, but the closing fell by 1.40% and 1.57%.
Safe investments like the US dollar and the Japanese yen rallied, and US Treasury yields dropped from four-month peaks.
The hopes for a second stimulus relatively soon rose when Democrats approved a $2.2 trillion bill last week and, shortly after, Treasury Secretary Steven Mnuchin said that lawmakers were giving the bill “a serious try.”
US House of Representatives Speaker Nancy Pelosi said Trump’s decision showed that the White House was in “complete disarray” because progress was being made between both sides.
Trump’s Tweets Throw Cold Water in the Market
Airline stocks, an industry that asked for additional aid to avoid layoffs, tumbled with the President’s decision. United Airlines shrunk 3.7%, Delta shed 2.9%, American slid 4.5%, and Southwest declined 2.4%.
Earlier today, Federal Reserve Chairman Jerome Powell reiterated that he believes the US economy needs more fiscal support.
In a speech to the National Association for Business Economics, Powell said that “too little support would lead to a weak recovery,” which would lead more businesses to file for bankruptcy.
From January to September, the number of businesses that filed for bankruptcy in the US is 33% higher than over the same period of last year, with a total of 5,529 filings, according to data released this week by legal service firm Epiq.
In September alone, commercial Chapter 11 filings were 78%higher than the previous year, with 747 new filings.
Without a new stimulus, it is hard to imagine a much better scenario now.