Stocks Slump, Dow Falls 600 Points As Congress Again Fails To Pass Coronavirus Stimulus Bill

Topline: Despite a massive new intervention from the Federal Reserve, the stock market moved lower again on Monday after a divided Congress failed to pass a $2 trillion coronavirus relief package for the second day in a row.

• The Dow Jones Industrial Average dropped 3%, nearly 600 points, while the S&P 500 was down 2.9% and the Nasdaq dropped just 0.3%.
• For a second time in less than 24 hours, Congress again failed to pass a giant fiscal stimulus package—worth around $2 trillion—aimed at stemming the economic fallout from the coronavirus pandemic, sending stocks lower.
• The failed vote on Monday came after lawmakers have for days been locked in heated negotiations, with Democrats criticizing the Republican bill for focusing too much on bailing out companies and not doing enough to help workers or provide sufficient funding to hospitals.
• Stock futures had hit their limit-down levels of 5% in overnight trading but bounced back somewhat after the Federal Reserve announced new wide sweeping measures to help support the market.
• The Fed made an extraordinary pledge for unlimited quantitative easing, an open-ended commitment to keep continuing asset purchases and expanding its balance sheet as necessary to support the economy during the pandemic.
• Stocks fell again, however, as a great deal of uncertainty remains on Wall Street: Investors are still awaiting an economic relief package, amid a growing number of coronavirus cases and subsequent business shutdowns across the country.

Crucial statistic: The S&P 500’s decline of more than 30% over the last four weeks is the steepest drop since 1931, during the Great Depression, according to Bespoke Investment Group. That’s a far greater drop at a faster pace than seen in the 2008 financial crisis, the dotcom bust and 9/11, the 1987 Black Monday crash or anything else seen since World War II. 

Big number: The market is having its worst month since 1931, falling up to 35% over the last four weeks. During trading on Monday, both the Dow and S&P 500 hit their lowest levels since December 2016.

Crucial quote: “The initial market reaction to the Fed moves was positive, but all eyes remain fixed on the fiscal stimulus negotiations,” says Ben Ayers, senior economist at Nationwide. “With the Fed now all-in and then some, the onus will be largely on fiscal policy to provide any further support for consumers and businesses.”

What to watch for: “The Federal Reserve is ‘all in’ already… it is fair to say there is little more the central bank can do to support economic growth and financial markets while we fight the COVID-19 global pandemic,” according to a note from Jeff Buchbinder, equity strategist for LPL Financial. “Now it’s Congress’s turn.”