U.S. markets remained flat with little trading volume on Christmas Eve, as President Trump threatens to derail Congress’ stimulus package.
MANHATTAN (CN) — Investors avoided coal in their stockings, but a stalled stimulus brought only a little Christmas joy as markets closed early on Thursday.
Markets were able to finish the week’s trading with paltry gains after three straight days of losses. By the closing bell at 1 p.m. EST, the Dow Jones Industrial Average gained just 71 points, a 0.24% increase, while the S&P 500 and Nasdaq saw similarly tiny increases.
Investors hoping to see another fiscal relief package have been disappointed by President Trump refusing at the last minute to sign off on a $900 billion bill. Legislators on Capitol Hill worked throughout the weekend to iron out differences, but when the smoke cleared Trump had slammed the bill as a “disgrace” packed with unnecessary pork.
House Republicans on Thursday blocked the president’s request for $2,000 in direct payments per American versus the $600 in the bill. Additionally, the threat of a presidential veto — or even a pocket veto — still looms, even though the bill passed the House 359-53 and the Senate 92-6.
Many experts pooh-pooh such an apocalyptic option as mere political theatrics. Tom Essaye of the Sevens Report wrote on Thursday that, “even if there were a lot of defections in Congress and suddenly there was not a veto-proof majority, or Trump simply ignores the bill [with a pocket veto], then Biden will sign the bill when he becomes president on January 20.”
The relief package initially had been held up by demands by Senator Pat Toomey, a Republican from Pennsylvania, to cull powers granted to the Federal Reserve. While that demand was softened dramatically, Toomey defended his intentions in an interview earlier this week on CNBC. “These are unprecedented, extraordinary powers, and they’re only justifiable in a real emergency,” Toomey said. “I supported that because I thought we were in such an emergency. We are clearly not in a financial crisis at this point.”
Economic indicators point to a dark winter, however. While new unemployment claims dropped — for the week ending December 19, initial claims dropped to 803,000, from 892,000 the prior week — they are still extremely high and likely not painting a full picture due to the abridged holiday week.
Pandemic Unemployment Assistance, the special program created for special federal unemployment claims, also fell, though in total just under 20 million Americans are receiving some form of unemployment assistance.
Additionally, consumer spending fell for the first time since April, while personal income declined for the second straight month. Personal consumption expenditures fell $63.3 billion, or a 0.4% decrease, while personal income dropped 1.1%, or $221.8 billion last month, according to the Bureau of Economic Analysis.
The department chalked up the fall in personal income to a decline in Paycheck Protection Program loans to businesses.
Consumer confidence also is dropping. The Conference Board’s index marked a 4-point drop in confidence from November, though short-term expectations actually increased about 3 points in that same period.
“Consumers’ assessment of current conditions deteriorated sharply in December, as the resurgence of Covid-19 remains a drag on confidence,” said Lynn Franco, a senior director at the Conference Board in a statement. “Overall, it appears that growth has weakened further in Q4, and consumers do not foresee the economy gaining any significant momentum in early 2021.”
She noted, though, that as consumers continue to hunker down at home, intentions to purchase appliances have increased.
“Realty is setting in and that means more moderate growth,” economic consultant Joel Naroff wrote Wednesday. “While the unemployment compensation drop was good news, it is clear that people are not replacing their government welfare payments with private sector income.”
Some analysts remain confident that, despite a potentially dark winter, the spring and summer of next year will bear out good things. “With vaccine distribution and stimulus, economic growth should pick back up by the middle of 2021,” researchers at PNC led by chief economist Gus Faucher wrote earlier in the week.
Such growth is likely contingent, though, on further stimulus. “With federal borrowing costs extremely low right now — the federal government can borrow for 10 years at an interest rate of less than 1% — it makes sense to provide near-term support to vulnerable sectors of the economy to ensure a strong economic recovery from the pandemic,” Faucher wrote.
Struggling businesses must be kept afloat, Faucher noted, as “permanent closures over the next few months of firms that could be viable post-pandemic would create a significant and avoidable drag on longer-run economic growth.”
Abroad, markets are similarly tenuous. On Monday, European markets plunged on news of a new mutation of coronavirus, which some researchers say could be 70% more transmissible than the original strain. The pan-European Stoxx 600 fell 2.3%, while markets in Germany and France did worse, dropping 2.7% and 2.4%, respectively.
On Thursday, Asian markets closed slightly up, while many markets in Europe made back some of what they lost earlier in the week as a Brexit trade deal between London and the European Union seems to be finally in place. Indices in Germany and Italy were closed for Christmas Eve.
Due to the mutation, several countries have imposed bans or restrictions on travelers from the United Kingdom. The United States has not done so yet, but some states, like New York, have asked for travelers to take Covid tests prior to landing.
Dr. Anthony Fauci has said that flight bans are probably too late, noting the new strain is likely already here.
Meanwhile, the “old” strain of Covid-19 continues to wreak havoc on the U.S. health system, which is being overrun in states like California. Vaccines for the virus have been rolled out nationwide and Pfizer-BioNTech have agreed to supply an additional 100 million doses of their vaccine by next July.
But so far only 1 million Americans have received the vaccine — a far cry from the goal of 20 million vaccinated by the end of the year, while 9.4 million doses have been distributed nationwide.
“The process of immunizations, shots in arms, is happening slower than we thought it would be,” Moncef Slaoui, chief science officer for Operation Warp Speed, said during a media briefing earlier in the week.
According to data compiled by Johns Hopkins University, there have been nearly 79 million cases of Covid-19 worldwide, with 1.7 million deaths. In the United States, about 18.5 million Americans have contracted the disease, while about 326,000 have died.