More recently, trading on Wall Street has been jerky as investors monitor ongoing negotiations between Republican and Democratic leaders in Washington over another round of aid to businesses and millions of people who lost their jobs during the coronavirus pandemic. The last round of top-up aid for unemployed Americans expired at the end of July.
“This is generally a slightly more selling market, and a lot of it has to do with waiting to see whether or not we get a fiscal stimulus package before the election,” said Sal Bruno, chief executive officer. investments at IndexIQ. “The chances of this happening diminish the closer we get to the election.”
While Speaker of the House of Commons Nancy Pelosi and Treasury Secretary Steven Mnuchin negotiated daily this week on a possible aid program. On Thursday, Pelosi said progress was still being made, but any compromise would likely meet stiff resistance from Republicans in the Senate.
Wall Street fears that if a deal on increased economic aid is not reached before the Nov. 3 election, it could leave the issue in limbo if there is a prolonged delay in sorting out the vote outcome.
“You currently have political motives to try to do something,” Bruno said. “After the election is over, depending on the outcome, maybe some of those political incentives change. It muddies the game a bit. “
In their debate Thursday evening, President Donald Trump and his Democratic challenger Joe Biden managed a more substantial exchange than in their first tumultuous clash several weeks ago. There were no major surprises in the market.
“The final US presidential debate was less chaotic than the first, but offered little new information to inform the outcome for the markets,” Axi’s Stephen Innes said in a comment. “Meanwhile, discussions regarding the post-election economic outlook were limited, particularly from President Trump.”
The uncertainty over whether Uncle Sam will provide more support to the economy overshadowed strong earnings reports from large corporations. While many reported profits for the summer that were hit by the recession caused by the coronavirus, their results for the most part were not as bad as had been feared.
Barbie maker Mattel jumped 10.8% after its latest profits beat analysts’ forecasts. Capital One Financial gained 1.7% after posting strong results.
The results of some companies did not meet the expectations of Wall Street. American Express fell 3.4% and chipmaker Intel fell 10.9%, the biggest drop in the S&P 500.
Drug maker Gilead rose 0.7% after U.S. regulators officially approved its antiviral drug remdesivir to treat hospital patients for COVID-19.
Treasury yields fell but remain close to their highest levels since June. The 10-year Treasury yield slipped to 0.84% from 0.87% Thursday night.
The recent rebound in bond yields follows encouraging recent data on residential construction, home buying and retail sales. It also suggests that bond investors are more optimistic that the economy will receive more help from Washington.
“The fact that (bond yields) have increased is not only to support the actual data, but that the data will continue to improve in the future, which depends to a large extent on obtaining ‘a stimulus package,’ Bruno said.
European markets are on the rise. The German DAX gained 0.7%, while the CAC 40 in Paris rose 1%, with investors welcoming strong earnings from companies like automaker Daimler and taking a grim economic report in their wake. Britain’s FTSE 100 gained 1.2% after Japan and the UK signed a trade deal to replace the pact with the EU, which will no longer apply after Britain exits the bloc.
Asian equity markets closed largely higher.
AP Business editor Elaine Kurtenbach contributed.