The Standard & Poor’s 500 was up by as much as 1.42% at 1:48 p.m. New York time today on hope that House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin would agree on a stimulus deal by Pelosi’s deadline of the end of today for passing a bill by the November 3 elections. Pelosi and Mnuchin were scheduled to talk by phone today at 3 p.m. (Mnuchin is traveling in the Middle East.) Those hopes were buoyed when Pelosi walked back her deadline, saying that as long as long as there was an agreement on the table, the deadline for an actual bill was the end of next week.
But as stocks moved into the last hour of trading they gave back much of those gains. At 3:15 p.m New York time the S&P 500 was up only 0.41%. (The index finished the day up 0.47%)
That’s what I’d expect when so much uncertainty surrounds these negotiations. Who knows what tomorrow (or even later tonight ) might bring? Sell and book your gains for the day makes a great deal of sense.
I think the odds are still against Pelosi and Mnuchin reaching an agreement. Among issues on the table are hundreds of billions of dollars to aid cities and states (Democrats say Gotta. Republicans say No way) and a Republican insistence that the bill include liability protection for businesses against damages relating to the coronavirus pandemic. (For example, a worker who got sick with Covid-19 and believed that their employers–a meat packer, for example–had been negligent in following public health guidelines would be unable to sue for damages.) That provision is poison to many House Democrats.
But Wall Street remains hopeful. The issue isn’t so much getting a bill passed by November 3, but getting a stimulus package done in order to avoid a potential post-election Senate gridlock until a new Congress takes the oath of office in January. The worry is that if Republicans lose the Senate on November 3, they will refuse to move on any bill during the November-December lame duck session while they still have the majority.
We should have somewhat more clarity tomorrow.
Do I have to say that news of a deal would lead to another rally and news that there would be no deal would lead to a sell off?
All this speculation on whether Pelosi and Mnuchin can reach a deal is, for the moment, ignoring the almost dead certainty that the kind of $2.4 billion package that the negotiators are talking about would meet a wall of Republican opposition in the Senate. Such a package would not pass with just Republican votes and would require Senate Democrats to buy in. Senate Majority Leader Mitch McConnell has opposed passing a stimulus bill with Democratic votes. The Senate is scheduled to vote today and tomorrow on a much smaller Republican proposal of $500 billion. It’s not clear that even that will win enough Republican votes to pass in the Senate. And it’s almost certain to face a Democratic No vote in the Senate and to die in the House should it get that far.
