Stock ETFs Trade Mixed To Lower Despite Stimulus Progress

In a surprise for many investors, U.S. stocks and index ETF continue to languish on Tuesday despite Congress finally approving a coronavirus relief package after months of protracted negotiations.

The S&P 500 slipped an additional 0.4%, dropping for its third straight trading session along with the Dow Jones Industrial Average, which fell 0.7%. Meanwhile, the Nasdaq Composite was largely unchanged, as a nearly 2.5% pop in Apple is offsetting some of its other components.

Major stock ETFs are mixed on Tuesday, with the SPDR Dow Jones Industrial Average ETF (DIA) and SPDR S&P 500 ETF Trust (SPY) losing ground while the Invesco QQQ Trust (QQQ) continues to tread water just after 1230PM EST.

Stocks have had an impressive but turbulent year, and at this point, stock and index ETF investors could be taking removing some risk into the year-end after capturing some healthy gains in 2020.
After being down double digits early in the year due to the pandemic, the S&P 500 is up almost 14% for 2020, while the Dow Jones Industrial Average has notched over 5%. However, the big winner is the Nasdaq, which has surged more than 41%, as Big Tech saved other suffering sectors like leisure and travel during the pandemic.

Although it includes more anemic stimulus checks than the first package, lawmakers approved an additional $900 billion in pandemic assistance to a $1.4 trillion measure to fund the government through Sept. 30, which President Donald Trump is expected to sign into law in the coming days or weeks before leaving office.

“The passage of this package only solidifies that there are massive structural tailwinds on the economy and markets as we enter 2021, which is longer-term positive for cyclicals and value styles (and the markets more broadly),” Tom Essaye, founder of Sevens Report, said in a note on Tuesday.

Investors and traders are still smarting from the precarious news that a new and more contagious strain of the coronavirus emerged in the U.K. The new variant has prompted a plethora of European countries to institute more stringent travel restrictions on visitors from the U.K., while leader like New York Governor Andrew Cuomo is asking for the U.S. to do the same.

Travel stocks have come under pressure as a result, with the Invesco Dynamic Leisure and Entertainment ETF (PEJ) losing 0.5% Tuesday.

However, many experts, including the World Health Organization, believe that the current vaccines will handle both strains, having little effect on the progress toward a more stable and infection-free economy.

″[The] new COVID-19 variant [is]unlikely to impact near-term therapeutics, return to normal,” Geoff Meacham, Bank of America research analyst, said in a note, “We don’t expect this new variant to derail ongoing treatment efforts — including vaccines.”

This is not to say that markets will be free from volatility. However, as financial pundits like Jonathan Golub, Credit Suisse’s chief U.S. equity strategist, anticipate ongoing choppiness into the new year before consumer spending really surges.

“I don’t think that there’s a smooth, easy straight-line story on this,” Golub said. “I think for the next three or four months, the reopening process is going to be sloppy.”

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