Wall Street Slides After Mnuchin Dims Stimulus Hopes

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October 15, 2020

Wall Street dropped on Wednesday, led lower by Amazon and Microsoft, as investors lost hope that a fiscal stimulus would be approved before the presidential election in November.

Downbeat comments from Treasury Secretary Steven Mnuchin that a deal would not likely be made before the vote added to fragile sentiment following a mixed bag of quarterly earnings reports from major Wall Street lenders.

“At this point getting something done before the election and executing on that would be difficult, just given where we are and the level of detail, but we’re going to try to continue to work through these issues,” Mnuchin said at a conference sponsored by the Milken Institute.

U.S. stocks had rallied in recent sessions on optimism that the government would provide a fresh stimulus to reduce damage caused by the coronavirus pandemic.

“Optimism took hold like a rocket last week and now it’s coming back down to earth a little bit,” said Mike Zigmont, head of trading and research at Harvest Volatility Management in New York. “I think a stimulus as a large macro event is already baked into stock prices. It’s just a question of when the details emerge and when the stimulus goes into effect.”

Amazon dropped 2% and Microsoft fell 0.8%, both weighing more than any other stocks on the S&P 500.

The Dow Jones Industrial Average was down 0.56% at 28,520.54 points, while the S&P 500 lost 0.66% to 3,488.78.

The Nasdaq Composite dropped 0.85% to 11,763.32.

Bank of America and Wells Fargo tumbled 4% and 5%, respectively, after a disappointing quarterly results, while Goldman Sachs rose 0.5% as strength in its trading business helped its quarterly profit surge 94%.

The S&P 500 banks index dropped 1.4%.

Third-quarter earnings season is getting underway, with signs of overall improvement in expectations of how badly U.S. companies have been hurt by the pandemic. Analysts expect earnings to fall 19% from a year earlier, according to Refinitiv IBES data, versus a 25% drop forecast on July 1.

Markets have also begun to digest the prospect of a Democratic victory, strategists and fund managers said.

While many investors view Democratic candidate Joe Biden as more likely to raise taxes, they are increasingly pointing to potential benefits of a Biden presidency, such as greater infrastructure spending and less global trade uncertainty.

UnitedHealth Group Inc dropped 2.7% despite raising its profit forecast as the U.S. insurer said it was difficult to predict the fallout of the pandemic on earnings.

Declining issues outnumbered advancing ones on the NYSE by a 1.22-to-1 ratio; on Nasdaq, a 1.63-to-1 ratio favored decliners.

The S&P 500 posted 22 new 52-week highs and no new lows; the Nasdaq Composite recorded 106 new highs and 10 new lows.

(Additional reporting by Medha Singh and Shivani Kumaresan in Bengaluru; Editing by Marguerita Choy)

Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor

Wall Street Slides After Mnuchin Dims Stimulus Hopes

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