Oct 7, 2020: President Donald Trump on Tuesday called off talks on a new stimulus plan to boost the COVID-ravaged US economy until after the election, sending Wall Street plunging and upending recent progress made in the long-delayed negotiations.
The Tuesday afternoon tweet undid optimism that had developed in recent days after House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin resumed talks on a follow-up measure to the $2.2 trillion CARES Act passed to blunt the coronavirus downturn.
Federal Reserve Chair Jerome Powell had earlier on Tuesday called again for additional spending to help the United States weather a downturn that's caused tens of millions of layoffs and a historic contraction in second-quarter annualized GDP.
But Trump accused the Democratic House leader of negotiating in bad faith and said he'd asked Senate Majority Leader Mitch McConnell to instead focus on confirming his appointed judge to an opening on the Supreme Court.
“Nancy Pelosi is asking for $2.4 Trillion Dollars to bail out poorly run, high crime, Democrat States, money that is in no way related to COVID-19,” Trump tweeted, citing an incorrect figure for the Democrats' latest proposal.
“We made a very generous offer of $1.6 Trillion Dollars and, as usual, she is not negotiating in good faith. I am rejecting their request, and looking to the future of our Country.”
The president's tweet sucked the enthusiasm from Wall Street traders who had been hoping for another injection of congressional cash, dropping the Dow 1.3 percent at the close.
Trump's rival in November's election, Joe Biden attacked, saying the president had “turned his back on every single worker whose job hasn't come back yet…. He turned his back on families struggling to pay rent, put food on their table, and take care of their kids.”
– Support needed –
Should he win the election in which polls show him trailing Biden, Trump added he would work with Congress to “pass a major Stimulus Bill that focuses on hardworking Americans and Small Business.”
The president said he told McConnell to focus the Republican-controlled chamber on confirming Amy Coney Barrett to the Supreme Court seat vacated last month by the death of Ruth Bader Ginsburg, which would give conservatives a solid six-to-three majority.
Earlier in the day, Powell told an economics conference the US recovery from Covid-19 would be “stronger and faster” with more government aid to protect against the possibility of accelerating job losses.
“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” Powell said.
“Even if policy actions ultimately prove to be greater than needed, they will not go to waste.”
The CARES Act passed as the pandemic struck in March included extra $600 weekly payments to the unemployed as well as a program of loans and grants for small businesses.
However, both programs expired around the end of July, and despite weeks of talks, Pelosi, Mnuchin and other top officials remained far apart on how much more to spend in another bill.
Any measure was expected to partially restore the weekly payments to the unemployed and the program of small business aid.
It also could have given additional funds to hard-hit airlines that laid off more than 30,000 people at the start of October after funds budgeted under the CARES Act expired.
– Trading on hope –
Art Hogan of National Securities told AFP hopes for additional spending from Congress played a key role in Wall Street's recent gains but “that door that was open a sliver has shut”.
Labor Department data released last week showed the pace of hiring in September slowing compared to the month prior, with a disappointing 661,000 jobs added.
Meanwhile, data shows more than 800,000 people filing new claims for jobless benefits each week, still above the worst single week of the 2008-2010 global financial crisis more than six months after the business shutdowns began.
Traders were happy to see Mnuchin and Pelosi revitalize talks last week, Hogan said, but now they've been let down.
“This has gone from being a tailwind to being a headwind for this market,” he said.