US stocks tumbled after President Donald Trump said he is ending stimulus talks until after the election, just hours after Federal Reserve Chairman Jerome Powell renewed his warning that the economy will stumble without additional fiscal support.
The benchmark S&P 500 slumped as much as 1.5 percent after Trump tweeted his comments, erasing a gain of as much as 0.7 percent. Treasury yields surged and the dollar jumped against most its major peers.
“It goes to show that the stimulus package was far from a forgone conclusion,” said Matt Miskin, co-chief investment strategist at John Hancock Investment Management. “The market had had been pricing in better economic grown, cyclical were doing better, small caps were doing better.
House Speaker Nancy Pelosi had called on Republicans to get on board with a version of the stimulus bill the House passed last week with only Democratic votes. But significant gaps remained between the Democrats’ $2.2 trillion proposal and a $1.6 trillion offer backed by the White House.
There are also lingering concerns about the trajectory of the pandemic and its effect on the economy. New York City’s seven-day average of daily cases is approaching Mayor Bill de Blasio’s warning threshold of 550. In France, the country’s statistics agency, downgraded its growth forecast to zero.
Elsewhere, the pound weakened after a report that the European Union has no plans to offer concessions to Boris Johnson before next week’s Brexit deadline. Oil rose further after the biggest gain since May.