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Rates and Equities Drop as Stimulus Talks Halt

Rates and equities fall as stimulus talks halt.  The risk-off move happened mid-day after President Trump signaled negotiations are stopping and would resume only after the November 3rd election.  President Trump tweeted that House Speaker Nancy Pelosi was “not negotiating in good faith,” and that after he is reelected, he “will pass a major Stimulus Bill that focuses on hardworking Americans and Small Businesses.” The S&P 500 and DJIA closed 1.4% and 1.3% lower as a result while the Nasdaq dropped 1.6%.  UST yields fell across the curve — the 10-year closing 5 bps lower at 0.73%. Markets have already erased much of the move this morning-  rates trading 1-5 bps higher across the curve  after President Trump went back on some of his stimulus comments, tweeting that he supports a “Stand Alone Bill for Stimulus Checks.”

Fed Chair Jerome Powell warns the US faces “tragic” risks without another stimulus package. His warning came just hours before President Trump stopped negotiations, sending markets into a frenzy.  Powell called the economic rebound “far from complete,” and added that “too little support would lead to a weak recovery, creating unnecessary hardship.”  He attempted to reconcile opposing bipartisan opinions regarding the size and scope of the next package, claiming that any leftover funds from a larger would not be wasted.  He praised Congress for approving $3 trillion in spending during the start of the pandemic, and commented, “the recovery will be strong and move faster if monetary policy and fiscal policy continue to work side by side to provide support to the economy until it is clearly out of the woods.”

White House endorses FDA guidelines for COVID-19 vaccine.  The guidelines place restrictions on how quickly the virus can be approved, most likely pushing the timeline past the November 3rd election.  In the guidelines, the FDA calls for the vaccine to go through a two-month waiting period to ensure those that received the drug do not have adverse effects.  Despite initially facing opposition from the White House, the Trump administration fully backed the guidelines.  The support passes the baton to the FDA, which will now decide when a vaccine is ready to be distributed.  Coronavirus cases continue to rise in the US with infections totaling 7.52 million with fatalities topping 211,000. 

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