Market Snapshot: Dow skids 400 points in final hour as investors fret odds of stimulus deal before election

Market Snapshot: Dow skids 400 points in final hour as investors fret odds of stimulus deal before election

Stock-market benchmarks traded near the session low in the final hour of trade Monday, a reversal of earlier gains, as investors gauged the prospects of a stimulus package being completed ahead of the Nov. 3 election.

What are major benchmarks doing?

The Dow Jones Industrial Average DJIA, -1.43% was off 400 points, or 1.4%, trading near 28,205, after touching as high as 28,711.93, while the S&P 500 SPX, -1.63% was down 53 points, or 1.5%, to 3,430, after briefly rising above the key 3,500 level. The Nasdaq Composite COMP, -1.65% was at 11,495 after falling 178 points, or 1.5%.

Stocks rose Friday, snapping a three-day losing streak and allowing the Dow and the S&P 500 to each log a third straight weekly gain. The Dow rose 0.1% for the week, ending Friday at 28,606.31, while the S&P 500 saw a 0.2% weekly rise to close at 3,483.81. The Nasdaq Composite COMP, -1.65% rose 0.8% for the week to end at 11,671.56.

What’s driving the market?

U.S. stocks came under heavy selling pressure Monday as investors worried that lawmakers and the White House could fail to strike an agreement on a new fiscal stimulus plan, as the window for a pre-election deal narrows.

“The two sides are very close,” said Phil Orlando, Federated Hermes’ chief equity market strategist, of the roughly $2 trillion size of each of the competing proposals. “The dollar amount is the least of our problems.”

Instead, Orlando sees continuing roadblocks between Republicans and Democrats on what the fresh aid would cover, including liability protections for businesses, the size of any additional weekly unemployment for workers and how cities and states can use additional pandemic aid.

“Trump is happy to give a quarter of a trillion dollars to cities to make sure cops and nurses remain employed,” he said, but added that he has no interest in “giving Chicago a bailout of its bankrupt pension plan.”

White House chief of staff Mark Meadows told reporters on Monday that the White House has increased its stimulus offer to almost $1.9 trillion, noting that Trump is willing to raise direct payments to households and small-business aid to help keep restaurants, hotels and other businesses afloat.

A top aide to House Speaker Nancy Pelosi, D-Calif., tweeted Saturday night that an agreement was needed within 48 hours to get a package approved before Election Day on Nov. 3.

Some analysts argued markets would be satisfied with a stimulus package that arrives after the election. Stronger-than-expected retail sales data on Friday underlined economic momentum and signaled that the consumer remains in good shape overall, which should allow consumption to hold up through the fourth quarter.

Read: Can the Dow rally without a stimulus deal? Bulls put faith in a resilient consumer

It is why some say investors are watching the odds of a Democratic landslide victory in the presidential election, amid expectations that control over the White House and Congress could lead to a more aggressive fiscal stimulus package next year than under a Republican administration.

Earnings season moves into fuller swing this week, with 84 S&P 500 companies and eight Dow components set to deliver third-quarter results. Among the 2020 heavy hitters due, investors will be paying close attention to results from highfliers Tesla Inc. TSLA, -2.01% and Netflix Inc. NFLX, -0.01%.

In U.S. economic data, the National Association of Home Builders’ monthly confidence index added two points to 85 in October.

Investors also parsed a 4.9% growth in China’s gross domestic product in the third quarter from a year earlier — falling short of expectations but bringing China’s growth trajectory closer to forecasts made at the beginning of the year for a 2020 expansion between 5.5% and 6%.

Which stocks are in focus?

How are other markets trading?

The yield on the 10-year Treasury note TMUBMUSD10Y, 0.765% was up 3 basis points to 0.76%. Yields and bond prices move in opposite directions.

In global equities, Hong Kong’s Hang Seng Index HSI, +0.63%  closed 0.6% higher and Japan’s Nikkei 225 NIK, +1.11% rose 1.2%, China’s Shanghai Composite Index SHCOMP, -0.71%  finished down 0.7%.

In Europe, the pan-European Stoxx Europe 600 SXXP, -0.18% fell 0.3% and London’s FTSE 100 UKX, -0.59%  fell 0.6%.

Gold prices GCZ20, -0.14% rose 0.3% to settle at $1,911.17 an ounce. Oil futures edged higher, with West Texas Intermediate crude for November delivery CLX20, -0.80% settled 0.1% lower at $40.83 a barrel.

The greenback was 0.3% lower on Monday, based on the ICE U.S. Dollar Index DXY, -0.26%.

William Watts contributed to this article