By Jem Bartholomew 

U.S. stocks slipped Thursday, with investors paying close attention to negotiations in Washington over a fresh stimulus bill.

The S&P 500 dropped 0.6% in morning trading, while the Dow Jones Industrial Average eased back 0.5%. The tech-heavy Nasdaq Composite fell about 1%.

Markets have been laser-focused on the prospect of a new wave of U.S. fiscal stimulus, even as the prospects of a deal being struck by House Democrats and Senate Republicans before the Nov. 3 election remain unclear.

"It's dominating the headlines and markets are certainly still paying attention," said Andrew Hunter, senior U.S. economist at Capital Economics.

The number of Americans applying for unemployment benefits fell to 787,000 last week, according to data from the Labor Department, a sign of a pickup in the market. Initial jobless claims had stabilized between 800,000 and 900,000 since late August, suggesting the summer's labor market improvement had cooled.

Talks between House speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin are expected to resume Thursday, but there was increasing talk of a vote after the election.

Tristan Hanson, multiasset fund manager at M&G Investments, said investors obsessing over a new stimulus package before the election are "frankly quite myopic, really. It would seem likely whoever wins that there'll be some form of fiscal stimulus in the next few months, that seems to be the mood music."

Among individual stocks, Tesla rose 3.1% after the electric-car maker reported its fifth consecutive quarter of profits after years of losses.

Shares of AT&T rose 5.1% after the telecommunications company reported a third-quarter loss that missed expectations but revenue that beat forecasts.

Coca-Cola's shares added 1.4% after third-quarter revenue beat expectations.

Shares of American Airlines slipped 2% following a third-quarter decline in revenue.

Align Technology jumped 31% after the maker of Invisalign teeth aligners reported better-than-expected third-quarter earnings. It said dentist and orthodontist offices were reopening after Covid-related shutdowns.

Overseas, the pan-continental Stoxx Europe 600 was down 0.2%, while the U.K.'s FTSE 100 was about flat after the government set additional support for companies affected by new coronavirus restrictions.

Europe has been struggling with a surge of new Covid-19 cases and fresh restrictions that threaten the region's economic rebound.

U.S. existing home sales are expected to rise in September for a fourth straight month when data is released by the National Association of Realtors. The U.S. housing market continues to be propelled by low interest rates.

Investors will also be watching for any surprises when the president and Democratic nominee Joe Biden meet at 9 p.m. ET for the final debate before the election.

"If something big happens it could certainly be a big issue in the markets tomorrow morning," but the likelihood is low, said Mr. Hunter.

In Asia, stocks fell. Japan's Nikkei index dropped 0.7%, South Korea's Kospi fell 0.7% and China's Shanghai Composite nudged down 0.4%.

In commodity markets, Brent crude, the international benchmark for oil, rose about 1% to $42.15 a barrel. Gold prices dropped 1.1%.


(END) Dow Jones Newswires

October 22, 2020 11:00 ET (15:00 GMT)

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