Investors Notch Slim Gains With Hope for Stimulus Deal Floundering

MANHATTAN (CN) — Wall Street posted meager gains as investors continue to await any sign that lawmakers on Capitol Hill can agree on a fourth stimulus package.

By the closing bell, the Dow Jones Industrial Average lost 85 points, a 0.3% decline, while the Nasdaq enjoyed a 1% gain. The S&P 500, which has steadily increased over the past month, came close to hitting a new high point but just missed, gaining only 0.2% for the day.

Ideological logjams have hampered another stimulus, with Republicans trying to pare the bill down to no more than $1 billion while Democrats want at least $2 trillion in spending. 

One of the politically charged fights related to the bill has become funding for the U.S. Postal Service, which Democrats say is necessary to ensure mail-in ballots are properly collected.

President Trump has derided mail-in voting as being rife with fraud and said the post office has a history of funding issues prior to his administration. “The U.S. Post Office (System) has been failing for many decades,” the president tweeted on Monday. “We simply want to MAKE THE POST OFFICE GREAT AGAIN, while at the same time saving billions of dollars a year for American Taxpayers.”

Trump, who recently boasted about how absentee ballots are less reliable thanks to his holdup of $3.5 billion in federal funding, now faces class-action lawsuits over the crisis. “Now, if we don’t make a deal, that means they don’t get the money, that means they can’t have universal mail-in voting,” Trump told Fox Business host Maria Bartiromo last week.

On Monday, Speaker Nancy Pelosi called back members of the House of Representatives from recess to deal with the Postal Service’s funding shortfall. A vote is planned for this weekend to provide up to $25 billion in additional funding to the Postal Service. 

The $25 billion was originally included in relief legislation proposed by House Democrats earlier this year, but Senate Republicans refused to hear the bill and focused instead on a leaner stimulus package. It is unclear if the Senate will return earlier to discuss the postal service funding or other stimulus proposals.

Investors also remain in the dark on the current status of the U.S.-China trade deal, after the six-month review of the Phase 1 deal due this weekend was reportedly postponed.

Many experts have said the trade deal — in which China agreed to purchase an additional $200 billion in U.S.-made goods in the next two years — was pie-in-the-sky wishful thinking even before the pandemic. 

Now, with trade faltering, the likelihood of China meeting its obligations are less certain, even though the country has made several bulk purchases of soybeans over the last few months. 

On the news, markets in Asia had a mixed outing, with the Japanese Nikkei dropping 0.8% and South Korea’s Kospi falling 1.2%, while Shanghai’s market gained 2.34%.

Domestically, traders received a spot of bad news after the Federal Reserve Bank of New York’s Empire State manufacturing index showed a drop in activity, from 17.2 points in July to 3.7 points in early August. Many economists had predicted only a drop of a few points, hinting at greater wounds among manufacturers.

On the plus side, the index for future business conditions fell 4 points to 34.3, which the central bank says indicates many firms are optimistic about the future but slightly less so. And selling prices increased for the first time in months, from -4.5 points to 4.7 points.

“The manufacturing recovery will settle into a slower path than the immediate partial snap back that’s been spurred largely by re-openings,” wrote Oren Klachkin, a senior economist at Oxford Economics.

Klachkin says the index data shows manufacturing will likely remain sluggish through 2021. “Soft demand, supply chain disruptions, and high uncertainty are set to persistently constrain the manufacturing rebound until a health solution for the virus is found,” he wrote.

The index had plummeted to -78 points in April but by June it had regained all of those losses.

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