By Anna Hirtenstein and Michael Wursthorn
U.S. stocks pared their losses Thursday after a senior
Republican lawmaker pledged an orderly transition of power
following the election this fall, tamping down some recent jitters
that had hampered stocks.
Senate Majority Leader Mitch McConnell said on Twitter that the
winner of November's presidential election would be inaugurated as
planned in January. Stocks immediately began paring losses after
the tweet, gaining enough ground to push all three major U.S.
indexes into positive territory in recent trading.
The tweet appeared to be a response to President Trump's refusal
to commit to a peaceful transition of power in a scenario in which
he lost the election. For investors, the comments added another
potential layer of uncertainty at a time when they are already
grappling with a rising number of coronavirus infections in many
parts of the world, including the western U.S.
The S&P 500 slipped 0.2%, after briefly flirting with
correction territory, considered a drop of 10% or more from a
recent high. The Dow Jones Industrial Average dropped 58 points,
while the Nasdaq Composite declined 0.2%.
Still, the turnaround might just be a temporary pause in the
recent selloff, some analysts said. Investors are most concerned
with the coronavirus and the pace of the economic recovery. Without
another round of stimulus, investors and others worry the economy
is vulnerable to another lashing if the pandemic worsens. New data
Thursday morning showed hundreds of thousands of Americans continue
to rely on jobless benefits, keeping claims near their historic
highs.
Federal Reserve officials on Wednesday stepped up calls for
additional fiscal relief to bolster the economy. Chairman Jerome
Powell and his colleagues said Congress and the White House, more
than the Fed, had the power to hasten a faster recovery.
"America sneezes and the rest of the world catches a cold: if
you're being told that the world's largest economy will not recover
without stimulus and they can't agree on a stimulus, then that has
to be a negative piece of news," said Tony Yarrow, a multiasset
fund manager at Wise Funds. "The mood among investors is extremely
pessimistic at the moment."
Mr. Powell is scheduled to offer congressional testimony on
Capitol Hill Thursday for a third day this week. He is expected to
give an overview of the economy and monetary policy, which could
provide clues into the central bank's actions going forward.
In bond markets, the yield on the benchmark 10-year Treasury
edged down to 0.664%, from 0.676% Wednesday.
The latest data on new jobless claims for the week ended Sept.
18 showed that the number of workers applying for jobless benefits
rose to 870,000, compared with 866,000 last week.
"This week's rise in initial jobless claims will come as a
surprise to the market," said Richard Flynn, U.K. managing director
at Charles Schwab. "Despite some encouraging numbers in recent
weeks, the level of weakness remains unprecedented, and the labor
market's recovery will likely rely on further fiscal support from
the government."
Daily new coronavirus cases in the U.S., which began to trend
downward in mid-July, have also been going up since mid-September
in a worrying sign for investors.
The timeline for a coronavirus vaccine being widely available
also remains unclear: Dr. Anthony Fauci, the nation's top
infectious-disease expert, expects to see data from Phase 3
clinical trials of some candidates indicating whether the vaccines
are safe and effective by November or December of this year.
In contrast, Mr. Trump has repeatedly claimed that a vaccine
will be available before the early November elections. On
Wednesday, he appeared to criticize forthcoming Food and Drug
Administration guidelines being developed around the release of a
vaccine, adding to concerns that the health issue was being
politicized.
Overseas, the pan-continental Stoxx Europe 600 dropped 1.1% as
investors weighed the prospect of stringent measures being
introduced in countries such as Germany, France and the U.K.
following a rise in infections.
"We all assumed restrictions would be over by September, but it
turns out that we're in September and we're being promised another
six months of dislocation," said Mr. Yarrow. "Everyone's having to
reset their expectations."
In Asia, major benchmark stock indexes closed lower as the
negative sentiment spread overnight. The Shanghai Composite Index
retreated 1.7%, and Hong Kong's Hang Seng Index fell 1.8%.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and
Michael Wursthorn at Michael.Wursthorn@wsj.com
(END) Dow Jones Newswires
September 24, 2020 10:50 ET (14:50 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.