GOP Stimulus Proffer Fizzles on Wall Street

Investors pulled back as Congress started deliberating a new stimulus package from Senate Republicans.

Senate Majority Leader Mitch McConnell during a Monday news conference on on Capitol Hill to highlight Republicans’ proposal for the next coronavirus stimulus bill. McConnell is joined by, from left, Sens. John Cornyn, Lamar Alexander, Roy Blunt, Richard Shelby, Tim Scott, Lindsey Graham and Mitt Romney. (AP Photo/Susan Walsh)

MANHATTAN (CN) — Failing to build on Monday’s momentum, markets faltered Tuesday amid congressional bickering over the next stimulus package.

By the end of trading, the Dow Jones Industrial Average lost almost 200 points, a 0.75% decrease, while the S&P 500 dropped 0.6% and Nasdaq fell 1.2%.

Meanwhile, gold nudged forward again, topping yesterday’s high of $1,941 per ounce to hit $1,953 per ounce. Indicating the precious metal has not yet hit its ceiling, a surge in buying out of China even led gold futures to top $2,000 per ounce at one point.

Investors have not seemed overly impressed by Senate Republicans’ stimulus proposal, which Majority Leader Mitch McConnell unveiled late Monday in a series of smaller legislation.

The $1 trillion stimulus package would reduce the weekly unemployment plus-up from $600 to $200, but offers another round of $1,200 stimulus checks. It also provides $190 billion in additional loans under the Paycheck Protection Program.

“I think from the perspective of the markets, the only thing they care about with respect to what comes out of D.C. is what the added jobless benefit will be,” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group. “The bid and offer seems $200-$600, with somewhere in the middle likely where it ends up.”

One of the more controversial provisions includes a bill to limit Covid-19 liability against companies. The proposal would create a legal safe harbor for businesses except in cases where an employee or customer could prove “by clear and convincing evidence” that he or she contracted Covid-19 due to the business’s gross negligence or willful misconduct.

Many legal experts have said such a proposal is functionally unworkable under tort law and possibly unconstitutional. What’s more, most lawsuits so far filed related to Covid-19 deal with insurance coverage disputes, causing some consumer advocacy groups to wonder where McConnell’s concern over a “wave of lawsuits” comes from.

McConnell has called the liability protection a “red line” for Republicans. “We’re not negotiating over liability protection,” he said in a Tuesday interview.

A few earnings reports from industry leaders did not stir Wall Street much, either.

Pharmaceutical giant Pfizer has been able to somewhat weather the economic storm, seeing its revenues drop only 11% between the second quarters of 2019 and 2020. Helped only by a slight uptick in its biopharma division, however, its net income also dropped 32% year over year, and its consumer health care division saw no revenues in Q2 2020.

Although the company noted its supply chain saw significant disruption, its guidance for the rest of the year has improved somewhat to an expected $50.6 billion in revenues.

With one candidate now in late-stage trials, the company is part of pack in the industry vying to develop a coronavirus vaccine. Pfizer has announced it should be able to supply 100 million doses of the vaccine, once approved, by the end of the year.

In its earnings release, manufacturer 3M reported about a $1 billion drop in net sales between Q2 2019 and Q2 2020 — lower than many analysts had expected — but the company’s net income increased slightly to $1.2 billion last quarter, compared with $1.1 billion a year ago.

McDonald’s announced it saw a 24% drop in global sales compared with the second quarter of 2019, while its revenues fell even further year over year, from $5.4 billion in Q2 2019 to $3.7 billion last quarter. The company’s net income fell 68% between those quarters.

It could have been worse for the company, however, especially compared with many restaurants that have been completely shuttered. “Our strong drive-thru presence and the investments we’ve made in delivery and digital over the past few years have served us well through these uncertain times,” CEO Chris Kempczinski said in a release.

Some companies had very few silver linings to their clouds. In its earnings release, Xerox saw more than one-third of its revenue evaporate, from $2.2 billion in Q2 2019 to $1.4 billion last quarter. Its pre-tax income dropped a huge 81% year over year, as did its earnings per share. Sales of office equipment have been hurt most, and Xerox expects them to continue to decline significantly. 

“No one can control or accurately predict what happens next,” CEO John Visentin said in a statement. “We have modeled numerous scenarios to ensure we have flexibility no matter how the pandemic continues to impact global business.”

Starbucks and Visa both plan to release their earnings around the closing bell Tuesday, while big names like Ford, General Motors, Amazon and AstraZeneca will report earnings later in the week.

Health news has again become mixed, as recently slammed states such as Arizona and Florida are now seemingly improving while other states may soon be hard hit. During an interview Tuesday morning on ABC’s “Good Morning America,” White House infectious disease adviser Dr. Anthony Fauci said some Midwest states are showing early signs of a renewed outbreak.

Fauci said Ohio, Indiana, Kentucky and Tennessee have shown an early indication of cases increasing based on the number of tests in those states. “That’s a sure-fire sign that you got to really be careful,” he said. “We just can’t afford yet again another surge.”

According to data compiled by Johns Hopkins University, more than 16.5 million people have been infected by Covid-19 worldwide, while 655,000 have died. More than 4.3 million Americans have contracted coronavirus, while nearly 148,000 U.S. deaths have been attributed to the virus.

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