By Mischa Frankl-Duval 

U.S. stocks wavered Monday as investors assessed the potential for a fresh stimulus package and China's economic recovery.

The Dow Jones Industrial Average slipped 28 points, or 0.1%, in morning trading. The S&P 500 also dropped 0.1%, while the technology-heavy Nasdaq Composite advanced less than 0.1%.

Stocks eked out muted gains last week as investors reckoned with persistently high Covid-19 cases, uncertainty surrounding the presidential election, and a tug of war over further fiscal stimulus measures from Washington.

Markets have largely written off expectations that a major U.S. government spending package is likely to be approved before Nov. 3. But investors are continuing to monitor the progress of talks between lawmakers and the White House, with the view that any relief offered to households or businesses before the election would be a bonus.

Over the weekend, House Speaker Nancy Pelosi told the White House it had until Tuesday to reach a deal with Democrats. If the deadline passes without a deal, ongoing talks would be increasingly unlikely to produce sweeping relief legislation worth trillions of dollars within the next two weeks, her aide suggested. Mrs. Pelosi and Treasury Secretary Steven Mnuchin spoke Saturday night, but a number of differences remain.

"It does feel like U.S. politicians are getting their heads together in a more constructive way in terms of fiscal stimulus," said Altaf Kassam, head of investment strategy for Europe, the Middle East and Africa at State Street Global Advisors. A fiscal stimulus package isn't urgently needed, but "if they can get a multipartite agreement across the line before the election, that would be huge."

With Covid-19 continuing to spread, further fiscal stimulus will be necessary to support the economy, said Robert McAdie, chief cross-asset strategist at BNP Paribas.

"Without renewed fiscal stimulus you'll see a new wave of unemployment, and a new wave of delinquencies and defaults, and that will certainly weigh on growth" he said.

Chinese officials said Monday that gross domestic product expanded by 4.9% in the third quarter from a year earlier, putting China's economy back toward its pre-coronavirus trajectory half a year after the pandemic gutted its economy.

"If you are looking at the consumer numbers, the manufacturing numbers, they're still very strong coming out of China," Mr. Kassam said. "That's starting us off on a positive tone, and we think that's a theme that's going to continue."

Investors in China and Hong Kong had a mixed reaction to the latest data, as the quarterly growth figure fell short of expectations. The Shanghai Composite Index closed down 0.7%. Hong Kong's Hang Seng Index pared gains to end the day 0.6% higher.

Many of the concerns regarding U.S. political uncertainty have also receded recently, investors said.

"It does look like a contested election is less of a possibility going forward," said Mr. Kassam, while cautioning that the polls and betting markets were wrong four years ago. "The worst outcome of the U.S. election for markets would have been a contested, protracted election."

The U.S. corporate earnings season will pick up pace this week, with Netflix, Tesla and AT&T among the major companies reporting in the coming days. Technology giant International Business Machines will report after the market closes.

"It's going to be all about the guidance, and the guidance has largely been better than expected, certainly in the U.S.," said Andrew Cole, head of multi asset in London at Pictet Asset Management. "Everybody knows earnings this year are going to be pretty horrid from a year-on-year perspective, so when we start to think about earnings, it's increasingly 2021 that matters," he said.

Shares of AMC Entertainment jumped 14% after the movie-theater operator said it would resume operations at some locations in New York state beginning Friday.

American Equity Investment Life Holding shares dropped 12%. The company on Sunday rejected a takeover offer by Massachusetts Mutual Life Insurance and Athene Holding, and said it instead reached a partnership with Brookfield Asset Management.

ConocoPhillips shares climbed 0.6% on news that it would acquire Texas shale driller Concho Resources in a $9.7 billion all-stock deal. Concho shares rose 1.1%.

Shares in Front Yard Residential surged 35% after the U.S. Virgin Islands-based real-estate investment trust said it had agreed to be acquired by a group led by investment firm Pretium Partners LLC and funds managed by Ares Management Corp. in a deal worth about $2.4 billion.

Overseas, the Stoxx Europe 600 slipped 0.2%. Euronext NV, which operates exchanges across Europe, said it had resolved a technical issue that had halted trading in some markets.

The yield on 10-year Treasury notes ticked up to 0.777%, from 0.743% Friday.

In commodities, U.S. crude-oil futures rose 0.4% to $41.28 a barrel.

--Alexander Osipovich and

Chong Koh Ping

contributed to this article.

Write to Mischa Frankl-Duval at Mischa.Frankl-Duval@wsj.com

(END) Dow Jones Newswires

October 19, 2020 11:28 ET (15:28 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.