By Alexander Osipovich and Mischa Frankl-Duval
U.S. stocks gave up early gains on Monday as hopes dwindled for
a fresh stimulus package before the election.
The Dow Jones Industrial Average was down 91 points, a drop of
0.3%, in late-morning trading. The blue-chips index had jumped more
than 105 points just after the opening bell.
The S&P 500 slipped 0.4%, while the technology-heavy Nasdaq
Composite declined 0.2%.
It looks increasingly unlikely that a big U.S. government
spending package will be approved before Nov. 3, analysts said.
Investors have been closely monitoring the on-again, off-again
progress of talks between lawmakers and the White House. Further
relief to households or businesses battered by the coronavirus
pandemic could bolster the economic recovery as the effect of
previous stimulus measures wears off.
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.
"President Trump would love to have a stimulus package before
the election," said Michael Mullaney, director of global markets
research at Boston Partners. "But there's no political upside for
Pelosi to sign anything before the election."
Markets are betting that a "blue wave" election--in which
Democrats win control of both the White House and Congress--will
eventually result in a large stimulus package, Mr. Mullaney said,
though he added that such an election result could ultimately
dampen market returns due to higher taxes.
With Covid-19 continuing to impact the economy, further fiscal
stimulus will be necessary, 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.
An advance in major U.S. stock indexes has stalled in recent
days, leaving the S&P 500 hovering less than 3% below the
record high it reached in early September. Last week, stocks eked
out muted gains as investors reckoned with persistently high
Covid-19 cases and political uncertainty.
Investors are also keeping a close eye on corporate
earnings.
Netflix, Tesla and AT&T are among the major companies
reporting financial results in the coming days. Technology giant
International Business Machines, or IBM, will report on Monday
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 23% 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 17%. 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 held steady, ticking up less than 0.1%, on
news that the oil giant would acquire Texas shale driller Concho
Resources in a $9.7 billion all-stock deal. Concho shares rose
0.7%.
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, Chinese officials said 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.
Investors had a mixed reaction to the data, as the growth figure
fell short of expectations. The Shanghai Composite Index fell 0.7%,
while Hong Kong's Hang Seng Index rose 0.6%.
The pan-continental Stoxx Europe 600 was down less than 0.1%.
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% on Friday.
In commodities, U.S. crude-oil futures rose 0.4% to $41.27 a
barrel.
--
Chong Koh Ping
contributed to this article.
Write to Alexander Osipovich at alexander.osipovich@dowjones.com
and Mischa Frankl-Duval at Mischa.Frankl-Duval@wsj.com
(END) Dow Jones Newswires
October 19, 2020 11:50 ET (15:50 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.