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Profit from the Pros By Kevin Matras Executive Vice President
Stocks Give Up Early Gains As Stimulus Talks End With No Deal
Image: Bigstock
Stocks finished lower, reversing early gains after talks for a fifth coronavirus package broke down.
Ever since last week, the market became more and more optimistic that this time, a fifth stimulus/relief package might finally get done. In fact, traders were led to believe a package was 'imminent' as that was the word the Speaker of the House used in trying to persuade the airline industry from laying off tens of thousands of employees.
But apparently the word 'imminent' doesn't mean what it used to. A deal was not in the offing. And the same sticking points that killed the last round of negotiations seemed to kill these as well.
It was particularly disappointing since Fed Chairman Jerome Powell earlier in the day almost begged Congress to provide more stimulus, warning of "tragic risks" if they did not act.
Surely, that would be enough for lawmakers to recognize the importance of such matters. But no dice.
Afterwards, the President instructed the Treasury Secretary to cease negotiations with the Speaker until after the election.
There's been some suggestion that an Executive Order could bridge that gap as there's plenty of unused money from previous bills not yet apportioned. We shall see.
Gladly, the economy continues to improve, even though the disparity of the economic recovery between states is becoming more pronounced.
Adding to the late day weakness was yesterday's JOLTS (Job Openings and Labor Turnover Survey) report which came in at 6.493 million job openings vs. last month's 6.618 million and views for 6.697 million. The markets shrugged it off early on. But it didn't help matters after the stimulus talks fell apart.
An extra 30-60 days or so until we get another relief package isn't likely to cause irreversible harm in the aggregate. But if you're a small business or a worker desperately waiting on some type of relief, it definitely will.
But things can change in Washington, D.C. quickly. Let's hope it does.
In the meantime as long as the economy can continue to expand (it's recovery has so far surpassed all expectations from months ago), everything should be fine. In fact, with analysts still calling for unprecedented growth for the remainder of the year, and the Federal Reserve Bank of Atlanta forecasting a whopping 35.3% Q3 GDP, the economy should be more than fine!
We'll get another look at the economy today with MBA Mortgage Applications (housing has been setting records this year), and Consumer Credit. And we'll also get the FOMC Minutes as well which could shed some further insight on the discussion they had at their last Fed Meeting.
For context, let's not forget that the S&P is up 53.3% from their pandemic lows and is up 4.0% YTD, while the Nasdaq is up 68.2% from their pandemic lows and is up 24.3% YTD!
And whether we get more stimulus or not, it looks like there's a lot more upside to go.
See you tomorrow,
Kevin Matras
Executive Vice President, Zacks Investment Research
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