By Will Horner 

Stocks drifted lower Wednesday as investors assessed prospects for a fresh stimulus bill and the health of major American businesses for cues on the economic outlook.

The S&P 500 opened down less than 0.1% after futures overnight wavered between gains and losses. The index added 0.5% Tuesday on optimism that Congress would reach an agreement on a spending package.

The Dow Jones Industrial Average lost 34 points, or 0.1%, while the tech-heavy Nasdaq Composite Index rose less than 0.1%. Treasury yields extended their climb, with the yield on the 10-year note reaching its highest level since June at 0.812%, from 0.796% Tuesday.

Democratic negotiators and the White House said they would press ahead with talks on the next coronavirus-relief package, setting aside a Tuesday deadline proposed by House Speaker Nancy Pelosi to hammer out the accord. Mrs. Pelosi signaled there was progress after her conversation with Treasury Secretary Steven Mnuchin.

The two sides didn't decisively establish whether a deal will be possible before Election Day, though White House chief of staff Mark Meadows said Mrs. Pelosi and the administration are trying to secure an agreement before the weekend. Any deal is likely to face deep opposition from Senate Republicans, especially if the proposed spending package approaches $2 trillion.

"What we are seeing at the moment is the market trading on these headlines, but to us, a pre-election stimulus deal seems unlikely," said Seema Shah, chief strategist at Principal Global Investors. "We can hear as much as we want from Pelosi and Mnuchin about progressing talks, but some senators have said simply that they won't support any package."

The number of daily coronavirus infections reported in the U.S. grew for a third straight day, with an indicator suggesting cases have been rising for more than two weeks. Hospitalizations continue to rise as well, triggering concern among investors that local authorities may need to step up lockdown measures, dealing a blow to the economic recovery.

"It just seems like we are in a very fragile period for markets, with people on a bit of a knife edge with what's happening with Covid and in the approach to the U.S. election," said Altaf Kassam, head of investment strategy and research for Europe, the Middle East and Africa at State Street Global Advisors. "All these back-and-forths over the stimulus deal don't help, though. It's more noise than signal, and markets are getting pushed around by it."

Investors are also parsing third-quarter earnings reports to gauge how businesses are weathering the economic downturn. Verizon Communications released figures this morning. After markets close, Tesla, Chipotle Mexican Grill, and Whirlpool are slated to release their earnings reports.

Snap shares jumped 21% in off-hours trading after its revenue grew by more than half, significantly exceeding analysts' expectations. Shares of other social-media companies also rose premarket. Twitter was up 5.7%, Pinterest rose 8.6% and Facebook gained 2.4%.

Netflix shares fell 4.7% in off-hours trading after the company said subscriber growth slowed in the third quarter, highlighting the fresh challenges from competitors ramping up their own streaming services.

Swedish telecommunications company Ericsson saw its New York-listed shares rise 8.5% premarket after it reported third-quarter profits that beat analysts' views.

Markets have been jittery in the weeks ahead of the Nov. 3 elections, with many investors wary of taking big bets even though opinion polls show that former Vice President Joe Biden and the Democrats may win the White House and the Senate.

"The clearest risk is the contested election, and if anything, I think it is an underestimated risk at the moment," Ms. Shah said. "If you are looking at how to allocate in the run-up to the election, the best thing to do is to look away: forget the noise, trade off fundamentals."

After the surprise of the 2016 election, many investors were choosing not to make strong calls ahead of the vote and opting for sectors that were likely to be a safe bet regardless of the outcome, said Kiran Ganesh, global head of investment communications at UBS Global Wealth Management.

"There is little rational reason to take a strong position on one of these one-off events, events that we have learned in recent years can take you by surprise," he said. "Keep politics out of the portfolio."

Overseas, the pan-continental Stoxx Europe 600 fell 0.8%.

In Asia, markets were buoyed by signs of progress in the stimulus talks. Japan's Nikkei 225 index rose 0.3% by the close of trading, and the Hang Seng Index climbed 0.8%.

In commodity markets, oil prices edged lower. Brent crude, the international benchmark, dropped 1.1% to $42.69 a barrel. Gold ticked 0.7% higher.

Write to Will Horner at William.Horner@wsj.com

 

(END) Dow Jones Newswires

October 21, 2020 09:47 ET (13:47 GMT)

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