Stock ETFs Trade Mixed Amid Doubt Over Coronavirus Relief Package

Stocks and index ETFs are mixed on Monday despite ongoing doubt over a fresh coronavirus stimulus package and continuing Covid-19 case increases.

The Dow Jones Industrial Average climbed 265 points, or 0.94%, while the S&P 500 remained essentially flat on the day, and the Nasdaq Composite slipped.

Stock index ETFs are trading mixed along with their underlying benchmarks. The SPDR Dow Jones Industrial Average ETF (DIA), SPDR S&P 500 ETF Trust (SPY), are both higher Monday, while the Invesco QQQ Trust (QQQ) is slipping, down 0.85%

The S&P 500 and Nasdaq Composite scrambled to hold ground as traders slashed positions in Big Tech stocks, which have led the rally since March. The Nasdaq fell about 1%, as many of the FANG stocks were down Monday. Facebook and Netflix shares dropped at least 2% each along with Microsoft, and Amazon slipped 1.5% while Alphabet slid 0.9%. The iShares Expanded Tech Sector ETF (IGM) lost 0.82% as of 1230PM EST.

Investors have been awaiting a coronavirus stimulus package, and over the weekend President Trump signed several executive orders that were targeted at extending coronavirus relief for citizens, but did require certain conditions such as state contributions.

The orders will extend distribution of unemployment benefits at a diminished rate, postpone student loan payments through the end of the year, and augment federal protections on evictions and create a payroll tax holiday. Analysts are optimistic that the move may spur a deal from lawmakers.

“While this move by Trump may lead to legal challenges, politically it puts pressure on Congress to reach a deal,” wrote Bill Stone, chief investment officer at Stone Investment Partners.

Trump’s push arrives after a failure by congressional leaders to pass a new coronavirus stimulus package last week. Several benefits from a package signed earlier in the year lapsed at the end of July, raising concern about the U.S. economy in the coming months. Some analysts see it as a harbinger of potential weakness in markets this month.

“The fiscal cliff still represents downside risk for August,” said Aneta Markowska, chief financial economist at Jefferies. Markowska added, however, any weakness from this will be “short-lived.”

“By September, another round of fiscal support will create positive momentum. The reopening of schools, even if only in some states, will reinforce the positive momentum by (1) boosting back-to-school shopping and (2) allowing more parents to return to work in September,” she said in a note to clients. “Bottom line, all the stars are lining up for another inflection point in activity and a second leg up in the reopening.”

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