Stocks fall as investors consider stimulus proposal, await first presidential

Stocks fell Tuesday, as market participants considered a pared-down stimulus proposal from congressional lawmakers, and awaited the outcome of the first presidential debate later this evening. A host of more economic data reports this week also loomed, including multiple reports on the US labor market.

Earlier, stocks had briefly turned higher, after a new report showed consumer confidence jumped by the greatest margin in more than 17 years in September. The data offered at least momentary hope that that optimism would translate into sustained consumer spending to support the economic recovery.

The communication services, information technology and utilities sectors pulled the S&P 500 lower, and the Dow shed more than 200 points. The moves contrasted with the sharp rally a day earlier, following four straight weekly losses in the broader market.

“We’re a little oversold, believe it or not. Last week, we saw some real panic in the stock market. People were really liquidating everything,” Chris Vermeulen, founder and chief market strategist, told Yahoo Finance on Monday. “And I think finally people kind of put aside the pessimism from last week … now people are kind of stepping back in hoping the market is going to find the bottom here and rally.”

House Democrats’ newly announced $2.2 trillion package offered a sliver of hope that Congress might make a last-minute move to pass further fiscal stimulus legislation before the November elections. But the package – a big step down from the more than $3 trillion Democratic lawmakers had sought earlier – leaves a chasm between their offer and the around $1 trillion Republican lawmakers have suggested would be their ceiling on a stimulus plan sum.

That has left many economists and policy pundits skeptical that a deal could be passed in the near-term – leaving a potential for markets to be disappointed on that front in the coming month. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin are set to hold phone conversations today over virus relief.

Elsewhere, market participants on Tuesday will be closely watching the first of three debates ahead of the presidential election, with President Donald Trump set to face former Vice President Joe Biden in Cleveland, Ohio for a 90 minute session starting at 9 p.m. ET. Topics set to be discussed include the records of Trump and Biden, the Supreme Court, Covid-19, the economy, race and civil unrest, and election integrity, the nonpartisan Commission on Presidential Debates announced last week.

While the debate itself will not likely serve as a platform for the candidates to announce new planned policies that could impact markets, it will give market participants an opportunity to fine-tune their views on which candidate might have a better chance of winning the White House.

“Debates rarely launch new policy initiatives. The spin after the debate is what matters,” UBS economist Paul Donovan said in a note Tuesday morning. “Polarization means that committed supporters will not change their views, and the number of undecided voters is lower than four years ago—but still large enough to affect the election outcome.”

1:15 p.m. ET: Stocks drop, Dow sheds 200+ points

The three major indices fell Tuesday afternoon, giving back some gains after rallying on Monday. The utilities, communication services and information technology sectors led declines in the S&P 500, while Chevron, The Travelers Companies and Dow Inc. lagged most in the Dow.

Here were the main moves in markets, as of 1:16 p.m. ET:

  • S&P 500 (^GSPC): -23.53 points (-0.7%) to 3,328.07

  • Dow (^DJI): -227.19 points (-0.78%) to 27,367.73

  • Nasdaq (^IXIC): -43.66 points (-0.39%) to 11,074.67

  • Crude (CL=F): -$1.75 (-4.31%) to $38.85 a barrel

  • Gold (GC=F): +$18.30 (+0.97%) to $1,900.60 per ounce

  • 10-year Treasury (^TNX): -2 bps to yield 0.643%

10:28 a.m. ET: Stocks turn positive after consumer confidence report

The three major indices pushed into positive territory Tuesday morning after the Conference Board’s September consumer confidence index topped expectations and rose by the most in more than 17 years.

“Confidence levels are still well short of where they were at the start of the year before the pandemic struck economic activity down starting in mid-March, but the sheer magnitude of today’s rise tells us the consumer thinks the worst days of the recession are over,” Chris Rupkey, MUFG Union Bank chief financial economist, said in an email. “The economy is not out of the woods yet as 20.0% said jobs were hard to get and 57.1% said employment opportunities were not so plentiful, but today’s overall recovery in consumer confidence is a big step forward for the economy and is supportive of stronger growth in the…

Read More: Stocks fall as investors consider stimulus proposal, await first presidential

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