President Donald Trump announced Tuesday that he was halting stimulus talks until after the election, causing stocks to drop suddenly before markets close. Trump’s declaration to end stimulus negotiations took Wall Street by surprise as the market rose in hopes that a second deal could be reached before the election. The move on Tuesday triggered a sharp selloff in recovery-sensitive stocks, such as airlines and retailers.
Several major Wall Street say they would lower their growth forecasts if negotiations stalled. Julian Emanuel, BTIG’s chief equity and derivatives strategist, said the S&P 500 is vulnerable to test its 200-day moving average of 3,113, which is roughly 7% below Tuesday’s close of 3,360.95. The moving average is a widely observed momentum indicator.
Stocks Gain on Hopes of Partial Relief
There is still hope for short-term help. Trump tweeted Tuesday night that Congress should approve $25 billion in emergency funding for airlines and $135 billion for the currently exhausted Paycheck Protection Program. The president subsequently backed another round of direct payments. He’s “ready to sign right now” if a standalone bill for the $1,200 checks reached his desk. The S&P 500 soared more than 1% after the news. While Trump’s support for piecemeal stimulus clearly boosted investor sentiment on Wednesday, some analysts were skeptical of the impact it could have.