Stocks fall as Mnuchin dampens expectations for a new stimulus package before the election

U.S. Treasury Secretary Steven Mnuchin on Wednesday dampened all hope for a new stimulus deal before the coming election. Following his comments, stocks fell from their early gain.

The S&P 500 fell 0.8%, the Nasdaq Composite was down 1.2%, while the Dow Jones Industrial Average dropped 200 points, or 0.7%.

Around midday, Mnuchin said it was quite impossible to secure a stimulus deal before the election, given that U.S. lawmakers are still far from reaching an agreement anytime soon. However, Republicans and Democrats were making some progress in some areas, while other areas remain in disagreement.

House Speaker Nancy Pelosi described the matter as “one step forward, two steps back," ever since the White House proposed the $1.8 trillion coronavirus stimulus deal, last week. She said the proposal “falls short” of what is actually needed.

Senate Majority Leader Mitch McConnell on Tuesday said the Senate will vote on a limited stimulus bill he is proposing. The new bill will be “targeted relief for American workers, including new funding” for unemployment insurance and payment protection for small businesses.

As the uncertainty surrounding the stimulus package continues to grow, the stock market remains unstable.

The stock of Big Tech dropped Wednesday, with Amazon shares sliding more than 2%, Facebook, Alphabet, Microsoft, and Netflix all dropped nearly 1%.

Stocks fell Tuesday after a four-day winning streak. The decline followed announcements of healthcare and pharmaceutical companies to pause their coronavirus vaccine development. Johnson & Johnson said it had to pause its vaccine trial after an “adverse effect” on one of the participants. Eli Lilly also announced on Tuesday that it would halt its trial for coronavirus antibody treatment. All these coupled with the disagreement between Republicans and Democrats over the next stimulus package.

Despite Tuesday’s market decline, stocks are still higher for October with Nasdaq up more than 6%, the S&P 500 gaining 4%, and the Dow up more than 3%.

“Markets are now hoping for (and trading on) a smooth election, a big stimulus, the end of the pandemic, and the economy being back to 2019 normal early next year,” said Brad McMillan, the chief investment officer at $200 billion Commonwealth Financial Network.

He also mentioned that much optimism in the market could make it vulnerable to bad news, as much uncertainty still surrounds the coronavirus pandemic. “While the economy continues to recover, job growth has slowed substantially even as layoffs remain very high—and we are still only halfway back to pre-pandemic employment levels.”

Earnings report for the just reported quarter

Goldman Sachs, Bank of America, UnitedHealth, and Wells Fargo among other forms have reported their quarterly earnings results.

Bank of America’s earnings beat analyst expectations but its revenue didn’t meet the mark, causing the stock to fall 2%. Goldman Sachs reported earnings that also beat analysts’ estimations, with its strong bond-trading revenue topping the result.

“On the earnings overall, so far so good. You’re going to see a broadening of earnings growth from where it was, concentrated in a few names, into more sectors and companies,” said Brent Schutte, chief investment strategist for Northwestern Mutual Wealth Management.