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Stocks fall on Wall Street as hopes for new virus aid fade

Ken Sweet, Damian J. Troise and Alex Veiga
Associated Press

Stocks gave up some of their recent gains Monday as Wall Street’s hopes that Washington will come through with badly needed aid for the economy before Election Day faded.

The S&P 500 dropped 1.6%, its worst day in more than three weeks. The benchmark index had been up 0.5% in the early going following a report that China’s economy grew at a 5% annual rate in the last quarter. The market’s slide was broad, though technology, health care and communication stocks bore the brunt of the selling. Treasury yields were mixed.

In this Wednesday, Oct. 14, 2020 file photo, the American Flag hangs outside the New York Stock Exchange in New York.

The early gains evaporated by midafternoon ahead of another round of talks between Democratic and Republican leadership over a long-sought economic stimulus bill. Wall Street is expecting that lawmakers will agree on new stimulus measures for the economy, but the odds of that happening before the Nov. 3 election have dimmed. Over the weekend, House Speaker Nancy Pelosi said a deal would have to come within 48 hours – or by Tuesday – for a stimulus package to be enacted by Election Day.

Uncertainty over when more aid for the economy may arrive, signs new coronavirus infections are surging and the upcoming election will likely make for a volatile few weeks, analysts say.

“We’re in a period here in the the next couple of weeks where the market goes sideways through the election,” Terry Sandven, chief equity strategist at U.S. Bank Wealth Management.

The S&P 500 fell 56.89 points to 3,426.92. The Dow Jones Industrial Average of big blue chips dropped 410.89 points, or 1.4%, to 28,195.42. The Nasdaq composite extended its losing streak to a fifth day, losing 192.67 points, or 1.7%, to 11,478.88.

Small company stocks also fell. The Russell 2000 gave up 20.18 points, or 1.2%, to 1,613.63. The index has gained 7% so far this month, outpacing the 1.9% gain for the broader S&P 500.

Stocks have been mostly pushing higher this month after giving back some of their big gains this year in a sudden September swoon. The benchmark S&P 500 has notched a gain in each of the past three weeks. Even so, trading often has been choppy from one day to the next, reflecting uncertainty over the timing of more stimulus for the economy, something investors have been hoping for since July, when a supplemental $600-a-week unemployment benefit package ran out.

Senate Majority Leader Mitch McConnell is expected to bring a his version of a stimulus bill to the floor of the Senate for a vote on Wednesday. However that bill is likely to get zero traction with the Democrat-controlled House of Representatives. So far, McConnell, Pelosi and President Donald Trump have not been on the same page.

Pelosi and Treasury Secretary Steven Mnuchin spoke Monday and are due to resume talks Tuesday, Pelosi spokesman Drew Hammill tweeted after the end of regular trading.

Investors were also looking ahead to another busy week of corporate earnings reports. Procter & Gamble, Netflix and American Express are a few of the companies that will reveal the extent of the virus pandemic’s impact during the most recent quarter.

Across the S&P 500, analysts are expecting companies to report another drop in profits for the summer from year-ago levels. But they’re forecasting the decline to moderate from the nearly 32% plunge from the spring as the economy has shown signs of improvement.

AMC Entertainment was among the few gainers Monday. Its shares jumped 16.4% after the movie theater chain said it plans to resume operations in theaters in New York State later this week.

Several airlines also rose after the Transport Security Administration said the number of passengers screened in a single day for flights in the U.S. topped one million on Sunday for the first time since the coronavirus cases began to spike in March. That compares with 2.6 million passengers screened by TSA on the same day last year, or roughly 60% fewer. United Airlines rose 3.9% and Southwest Airlines edged up 0.4%.

ConocoPhillips fell 3.2% after the oil giant announced it would buy Concho Resources for $9.7 billion. The deal is the largest in the oil industry since crude prices plummeted this year due to the COVID pandemic. Concho lost 2.8%.

European stocks closed broadly lower, and Asian markets ended mixed.