Stocks dive after Trump pulls plug on stimulus talks

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(CBS News)–Stocks abruptly sank on Tuesday afternoon after President Donald Trump moved to scuttle talks with Democratic lawmakers over another round of coronavirus relief.

In a series of tweets, Mr. Trump said he had instructed administration officials to end the negotiations, accusing House Speaker Nancy Pelosi of “not negotiating in good faith.”

The Dow swung from a gain of about 200 points earlier in the day to a loss of 315 points, or 1.1%. The broader S&P 500 and tech-heavy Nasdaq also dropped suddenly. 

Pelosi reacted to the president’s announcement with a statement saying, “Clearly, the White House is in complete disarray.”

Investors had hoped that congressional leaders and Treasury Secretary Steven Mnuchin could reach a compromise on further fiscal stimulus. Democrats earlier this month passed a $2.2 trillion package that would restore a $600 per week payment to supplement unemployment benefits, direct a second stimulus check to million of Americans and provide funding for state and local governments. 

Although Mnuchin had made a counteroffer of $1.6 trillion, the sides have been unable to broker a deal.

Mr. Trump’s message came just hours after Federal Reserve Chair Jerome Powell urged Congress to come through with more aid, saying that too little support “would lead to a weak recovery, creating unnecessary hardship for households and businesses.”

Powell said that government support — including expanded unemployment insurance payments, direct payments to most U.S. households and financial support for small businesses — has so far prevented a recessionary “downward spiral” in which job losses would reduce spending, forcing businesses to cut even more jobs.

But without further support those downward trends could still emerge, the chairman said.

“A long period of unnecessarily slow progress could continue to exacerbate existing disparities in our economy,” Powell said. “That would be tragic, especially in light of our country’s progress on these issues in the years leading up to the pandemic.”

The end of stimulus negotiations would also be a blow for the nation’s airlines, which are lobbying for billions in additional financial assistance to offset the impact of COVID-19 on the transportation sector. American Airlines last week began furloughing 19,000 workers, while 13,000 United Airlines employees are being furloughed.

Airline shares declined on Tuesday after Mr. Trump said he was pulling the plug on relief talks. 

“As Secretary Mnuchin and Speaker Pelosi moved close to a deal that would provide relief to working people across the country, President Trump issued one tweet to blow up the deal and leave millions of essential workers in freefall,” Sara Nelson, president of the Association of Flight Attendants-CWA International, said in a statement. “Senate Republicans will own this cruel maneuver that puts our economy in a tailspin unless they demand COVID relief now.”

First published on October 6, 2020 / 4:22 PM

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