Stocks Dive After President Trump Shatters Stimulus Hope


Stocks took a dive Tuesday afternoon after President Donald Trump in a set of tweets said he instructed his representatives to stop negotiations with House Democrat Nancy Pelosi (D-Calif.) for a second stimulus bill until after the November election.

Key Facts

“I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business,” Trump tweeted shortly after 2:45 p.m. EDT. 

The tweets come after months of back and forth between Democrats and the White House over the cost of additional stimulus funding in an effort to boost the economy out of a recession sparked by the coronavirus pandemic. 

Stocks began plunging almost immediately, with the Dow Jones Industrial Index crashing more than 500 points within minutes and ending the day down 375 points, or about 1.3%; it was previously up close to 1% Tuesday.

The S&P 500, which was virtually flat for the day before the announcement, closed down about 1.4%, while the tech-heavy Nasdaq was down 1.6%. 

The airline industry, which was on standby for a possible separate aid deal, was hit a bit harder with the S&P 500 Airlines Industry index finishing down about 3.1%, erasing modest gains from earlier in the day.

American Airlines has already cut thousands of flights from its November schedule and shares of the company fell 4.5% on Tuesday.

Key Background

President Trump’s tweets follow days of urgent negotiations between House Speaker Nancy Pelosi (D-Calif.) and Treasury Secretary Steven Mnuchin, who resumed talks late last week after a months-long standstill. Pelosi and Mnuchin spoke by phone for over an hour on Monday to “discuss the justifications for various numbers,” but Pelosi later told House Democrats that progress was “very slow.” Now with just 28 days left before the November election, the two were slated to speak again on Tuesday, but as of market close, it’s unclear if Trump’s announcement may change that.


In prepared remarks on Tuesday morning, Federal Reserve Chairman Jerome Powell cautioned that ending fiscal support by failing to pass another aid package could derail a recovery that’s been quicker than expected, but still incredibly fragile.

Crucial Quote

Experts have been saying for weeks that a second stimulus bill before the year’s end is necessary for a sustained economic recovery: “What lawmakers do or do not do in the next few days will have outsized repercussions for the recovery given how fragile the collective psyche appears to be. Consumer and business sentiment collapsed when the pandemic hit in March and April, and while it is up from its pandemic lows, it isn’t up by much,” said Moody’s Analytics Chief Economist Mark Zandi in a weekend note to clients. “President Trump’s illness and the unprecedented political rancor over the election may be too much for people to bear. If as a result they lose confidence in the recovery and pull back on their spending, investment, and hiring, then the recovery will unravel. Lawmakers don’t have much time left to shore up that faith.”

Further Reading

Trump Says He Told Aides To Stop Negotiating Stimulus Until After Election (Forbes)

Powell Urges More Stimulus From Congress, Citing ‘Strong But Incomplete’ Recovery (Forbes)

Trump Feeling ‘Extremely Well’ In Morning After Hospital Discharge, Doctor Says (Forbes)

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