The Dow Jones Industrial Average is dropping following comments that suggest more economic stimulus is not going to happen any time soon.
Blame stimulus headlines for the market’s slide. At around 11:30 a.m. Thursday, news hit suggesting that the Trump administration would leave stimulus to Congress.
Congress, however, doesn’t look anywhere close to making a deal. Politico, for instance, had a story focusing on the wide gulf that still remains between Republicans and Democrats on stimulus. “I gather [Pelosi] and the Democratic leader in the Senate still are looking at something dramatically larger. That’s not a place I think we’re willing to go,” the story quoted Senate Majority Leader Mitch McConnell as saying.
At the same time, Fed Chair Jerome Powell continuing to say the economy needs more stimulus. “My sense is that we will need to do more, and that Congress may need to do more as well,” Powell was quoted as saying in the New York Times.
But those are just headlines, and not anything shockingly new, which suggests that the market is continuing to adjust after its surge following the election and Monday’s vaccine news from Pfizer. The Dow Jones Industrial Average, after all, is still up 2.4% this week.
And there’s still a chance that stimulus does get done. Evercore ISI’s Krishna Guha notes that Delta Air Lines (DAL) is a large employer in Georgia, and could become a campaign issue in the two Senate runoffs in that state if a package to support the carriers isn’t passed. “We think McConnell faces severe pressure to deliver this before the vote on January 5 or risk the Democrats positioning the Republican Senate as the roadblock to relief at a time when Delta could be laying off workers on a potentially large scale,” he writes.
Write to Ben Levisohn at Ben.Levisohn@barrons.com