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Oct. 19, 2020, 4:40 p.m. EDT

Dow books worst day in four weeks, falls over 400 points, as investors fret odds of stimulus deal before election

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By Joy Wiltermuth and Sunny Oh

Stock-market benchmarks finished near session lows Monday, after surrendering earlier gains, as investors worried about the prospects of a stimulus package being completed ahead of the Nov. 3 election.

How did major benchmarks fare?

The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.25% closed 410.89 points lower, down 1.4%, at 28,195.42, after trading as high as 28,711.93. The S&P 500 /zigman2/quotes/210599714/realtime SPX +0.18% finished 56.89 points lower, or 1.6%, at 3,426.92, after briefly rising above the key 3,500 level. The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.74% ended at 11,478.88 after falling 192.67 points, or 1.7%.

Stocks rose Friday, snapping a three-day losing streak and allowing the Dow and the S&P 500 to each log a third straight weekly gain. The Dow rose 0.1% for the week, ending Friday at 28,606.31, while the S&P 500 saw a 0.2% weekly rise to close at 3,483.81. The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.74% rose 0.8% for the week to end at 11,671.56.

What drove the market?

U.S. stocks came under heavy selling pressure Monday as investors worried that lawmakers and the White House could fail to strike an agreement on a new fiscal stimulus plan, as the window for a pre-election deal narrows.

In One Chart: ‘Warning sign’: Dow industrials lag behind as transports keep making new highs

“The two sides are very close,” said Phil Orlando, Federated Hermes’ chief equity market strategist, of the roughly $2 trillion size of each of the competing proposals. “The dollar amount is the least of our problems.”

Instead, Orlando sees continuing roadblocks between Republicans and Democrats on what the fresh aid would cover, including liability protections for businesses, the size of any additional weekly unemployment for workers and how cities and states can use additional pandemic aid.

“Trump is happy to give a quarter of a trillion dollars to cities to make sure cops and nurses remain employed,” he said, but added that he has no interest in “giving Chicago a bailout of its bankrupt pension plan.”

White House chief of staff Mark Meadows told reporters on Monday that the White House has increased its stimulus offer to almost $1.9 trillion, noting that Trump is willing to raise direct payments to households and small-business aid to help keep restaurants, hotels and other businesses afloat.

A top aide to House Speaker Nancy Pelosi, D-Calif., tweeted Saturday night that an agreement was needed within 48 hours to get a package approved before Election Day on Nov. 3.

Some analysts argued markets would be satisfied with a stimulus package that arrives after the election. Stronger-than-expected retail sales data on Friday underlined economic momentum and signaled that the consumer remains in good shape overall, which should allow consumption to hold up through the fourth quarter.

Read: Can the Dow rally without a stimulus deal? Bulls put faith in a resilient consumer

It is why some say investors are watching the odds of a Democratic landslide victory in the presidential election, amid expectations that control over the White House and Congress could lead to a more aggressive fiscal stimulus package next year than under a Republican administration.

Earnings season moves into fuller swing this week, with 84 S&P 500 companies and eight Dow components set to deliver third-quarter results . Among the 2020 heavy hitters due, investors will be paying close attention to results from highfliers Tesla Inc. /zigman2/quotes/203558040/composite TSLA +1.28% and Netflix Inc. /zigman2/quotes/202353025/composite NFLX +2.28% .

In U.S. economic data, the National Association of Home Builders’ monthly confidence index added two points to 85 in October.

Investors also parsed 4.9% growth in China’s gross domestic product in the third quarter versus a year earlier — falling short of expectations but bringing China’s growth trajectory closer to forecasts made at the beginning of the year for a 2020 expansion between 5.5% and 6%.

Which stocks were in focus?

The yield on the 10-year Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +3.13% was up 1.7 basis points to 0.76%. Yields and bond prices move in opposite directions.

In global equities, Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI +0.36%  closed 0.6% higher and Japan’s Nikkei 225 /zigman2/quotes/210597971/delayed JP:NIK +0.74% rose 1.2%, China’s Shanghai Composite Index /zigman2/quotes/210598127/delayed CN:SHCOMP -0.58%  finished down 0.7%.

In Europe, the pan-European Stoxx Europe 600 /zigman2/quotes/210599654/delayed XX:SXXP +0.18% fell 0.3% and London’s FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +0.18%  fell 0.6%.

Gold prices rose 0.3% to settle at $1,911.17 an ounce.  Oil futures edged higher, with West Texas Intermediate crude for November delivery settled 0.1% lower at $40.83 a barrel.

The greenback was 0.3% lower on Monday, based on the ICE U.S. Dollar Index /zigman2/quotes/210598269/delayed DXY -0.06% .

William Watts contributed to this article

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Volume: 302.55M
June 14, 2021 5:15p
+7.71 +0.18%
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June 14, 2021 5:15p
US : Nasdaq
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Volume: 4.09M
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US : Nasdaq
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Volume: 4.09M
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US : U.S.: Nasdaq
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+7.80 +1.28%
Volume: 20.41M
June 14, 2021 4:00p
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JP : Nikkei
+213.07 +0.74%
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US : U.S.: ICE Futures U.S.
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