Stocks were mixed Wednesday as traders considered lawmakers’ final efforts to get a stimulus package through before year-end, and digested the Federal Open Market Committee’s December monetary policy decision.
The Nasdaq rose to a fresh record close, and the S&P 500 ticked up to end just short of a record closing high. The Dow came under pressure and closed out the session slightly lower. The moves also came after the Commerce Department released a much weaker-than-expected print on November retail sales, which showed a sharper drop in consumer spending than anticipated as new virus-related restrictions came into effect.
Wednesday afternoon, the Federal Open Market Committee included in its statement new language committing to continue its asset purchase program at the current rate “until substantial further progress has been made toward the committee’s maximum employment and price stability goals.” These asset purchases – comprising $80 billion in Treasurys and $40 billion in mortgage-backed securities per month – have been a key tenet of the Fed’s strategy to keep financial markets functioning smoothly during the coronavirus pandemic.
Traders this week have also increased their bets on a stimulus package getting passed in Washington, despite months of disappointment over deadlocked negotiations.
House Speaker Nancy Pelosi, Senate Majority Leader Mitch McConnell, Senate Minority Leader Chuck Schumer, Treasury Secretary Steven Mnuchin and House Minority Leader Kevin McCarthy convened on Tuesday to discuss both the COVID-19 relief package and broader government spending bill, to which the virus relief aid is expected to be attached. The COVID proposal under discussion was split into two earlier this week to cleave off some of the more contentious provisions around aid for state and local governments and liability protections into a separate, smaller bill.
Politico reported Wednesday morning that negotiators were closing in on a relief package that would total $900 billion, or nearly the size of the two bills combined, that would include direct payments to Americans, but exclude the more divisive provisions that have kept lawmakers at a stalemate for months.
“The odds of a fiscal deal before year’s end have been improving,” Goldman Sachs economists led by Jan Hatzius wrote in a note Tuesday. “While we had expected a smaller package to pass now with a larger package waiting until early 2021, it appears increasingly likely that most of this could pass this week. Either way, this is likely to be the last substantial COVID-relief package unless Democrats win both Senate seats in the January 5 runoff elections in Georgia.”
Heading into year-end, the vast majority of strategists have so far struck a bullish tone on equities for 2021. Still, many acknowledged that near-term risks remain, including the ongoing pandemic…
Read More: Stocks mixed, Nasdaq hits record closing high as traders digest Fed