The Dow Jones closed in the red after erasing a – point surge.
The US stock market suffered negative price-action after a massive gap higher at the opening bell.
Trump, McConnell, and Pelosi are all backing more government intervention in the real economy.
The Dow Jones completely erased its aggressive rally ahead of Tuesday’s close, as hopes of additional fiscal stimulus from the US government failed to keep the stock market in positive territory.
While the long-term effects of all this spending could prove harmful for the stock market, Dow bulls continue to cheer the prospect of additional financial aid for US families and small businesses.
Dow Jones Ends Lower After Erasing 1164 – Point Surge
The Dow surged at the open of trade, then spent the rest of the session paring those gains. | Source: Yahoo Finance
All three of
the major US stock market indices closed in the red despite making
Crude oil continued to slide from its recent peak, diving 6.6% into the lower rungs of the $ 41 per barrel handle. Gold prices also declined in risk-on trade, losing around 0. 166%.
Stock Market Bulls Enthusiastic for Another Fiscal Bomb
I will work with Secretary Mnuchin and Leader Schumer and hope to approve further funding for the Paycheck Protection Program by unanimous consent or voice vote during the next scheduled Senate session on Thursday.
He was just the latest legislator to pump the stock market with stimulus hopes. House Speaker Nancy Pelosi talked of wanting at least another $ 1 trillion in aid .
Clearly, fiscal spending has become a bipartisan activity, and President Donald Trump stated on Monday that another round of direct payments is under “very serious consideration.”
But what is a feast for Dow bulls right now could devolve into a famine down the line, because the bill for all this debt is going to have to be paid eventually.
Writing in a new report, ING economist Mark Cliffe raises the specter of drastic austerity measures lurking in the aftermath of the pandemic, stating,
With government debts set to soar to levels. unprecedented in peacetime, this raises the question of how far and how quickly austerity measures to reduce debts should be applied once the pandemic is over…
A key questi on is whether governments will aim to impose many years of austerity to pay off their pandemic debts. More radical options suddenly become real.
The potential for sustained higher taxation beyond merely paying down some of the “corona-debt” is a genuine threat.
The government is “solving” the economic Crisis with increased unemployment benefits, and reducing these back to earlier levels could prove a difficult task.
History shows that once public assistance programs expand, they are rarely rolled back .
History sh ows that reductions in welfare spending are exceptionally rare once it is increased. | Source: The Heritage Foundation
All the while, the Federal Reserve is operating quietly in the background, making historic interventions to keep the markets functioning correctly.
Dow Stocks: Apple & Boeing Slide, 3M Makes a Deal With Trump
It was a mixed (day in the Dow , and risk sentiment continued to improve in select sectors.
But after a great day on Monday, both Apple (-1.2%) and Boeing (-4.8%) dropped into the red.
There was good news for 3M, who is seeing massive demand for medical masks but has been assailed by the Trump administration for e xporting them.
The feud appears to be over, as a deal is now in place for an extra million masks for the United States. MMM stock was up 2.8% after the news broke.
The prospect of more fiscal stimulus was a bullish catalyst for American Express, which rallied 4.4% on hopes that these measures might help Americans pay off existing consumer debt, as well as juice further spending.
Bond yields rose, helping lift JPMorgan Chase ( 1.3%) and Goldman Sachs ( 4.9%) for a second straight day, while global growth indicator Caterpillar enjoyed a 1.2% rally.
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