Stock ETFs Struggling Near Lows As Investors Await Stimulus Package

Stocks gapped down again Sunday night, triggering another circuit breaker and trading halt in the futures markets, even after the Federal Reserve released new guidelines to keep markets working fluidly. Investors and traders are now awaiting lawmakers to come to a consensus on an economic stimulus and rescue plan to mitigate the effects of the coronavirus contagion.

The major averages dropped into the Sunday trading session, spiking dramatically on a possible stimulus package being passed, before tanking after it failed. Equities tempered losses midday after Senate Minority Leader Chuck Schumer said he anticipates the Senate to reach a deal on a massive fiscal stimulus package, on Monday, but indices are still languishing near recent lows.

The Dow Jones Industrial Average tumbled almost 600 points lower, or 2.9%, reaching its lowest level in three years, while the S&P 500 dropped 3.1%, and the Nasdaq Composite held up the best, falling 1.5%

Benchmark stock index ETFs are following the lower trade-in markets today with the SPDR S&P 500 ETF Trust (SPY) off 2.2%, the SPDR Dow Jones Industrial Average ETF (DIA) down 2.62%, and the Invesco QQQ Trust (QQQ) almost flat on the day, the least affected of the three benchmark indices.

“While the Fed’s actions are an enormous help, the only way the markets are going to find sustainable improvement is when the economy is allowed to come back to life, or at least there is a real path in place for how that is going to happen,” said Paul Hickey of Bespoke Investment Group, in a note.

The fiscal stimulus bill, which Schumer says is still in the works, failed an important procedural Senate vote Sunday as Democrats claimed the measure was not effective enough for impacted workers and instead favored company bailouts, a problem in the past financial crisis as well. House Speaker Nancy Pelosi implied she was not supportive of the Republican version of the stimulus plan, stating: “From my standpoint, we’re apart.”

David Kostin, Chief U.S. Equity Strategist at Goldman Sachs, said the rate at which the market recovers will be determined by how rapidly the virus is contained, whether businesses will have ” access to enough capital and liquidity to last the 90 to 180 days,” and whether fiscal stimulus can balance growth forecasts.

“If short-term shutdowns lead to business defaults, closures, and permanent layoffs, the damage to corporate earnings growth could persist well after the virus is contained,” Kostin said in a note.

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Stock ETFs Struggling Near Lows As Investors Await Stimulus Package

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