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US Stocks Drift Lower in Reaction to Dwindling Financial Aid, Rising Virus Rates

The major U.S. stock indexes settled lower in relatively light trading on Friday as investors reacted to dwindling aid for the U.S. economy and rising coronavirus infection rates. The benchmark S&P 500 and the blue chip Dow posted marginal losses for the week, while the tech laden NASDAQ settled slightly higher from last Friday’s close.

In the cash market on Friday, the S&P 500 Index settled at 3557.54, down 24.33 or -0.72%. The Dow Jones Industrial Average finished at 29263.48, down 219.75 or -0.80% and the NASDAQ Composite closed at 11854.97, down 49.74 or -0.45%.

More than Half of US Virus Rampant “Red Zone”

Investors remain worried about the economic cost of rising infections and new lockdowns and restrictions, which grew Friday. White House Coronavirus Task Force coordinator Deborah Birx on Friday said more than half of the United States was a virus-rampant “red zone,” and Americans should limit gatherings on Thanksgiving Day to immediate family members.

The U.S. seven-day average of daily new COVID-19 infections now stands at 165,029, according to a CNBC analysis of Johns Hopkins data, 24% higher than a week ago. Last Thursday alone, a record 187,833 cases were reported. Many states have rolled back reopening plans and implemented fresh restrictions to curb the spread.

California Governor Gavin Newsom on Thursday issued a “limited Stay at Home Order” on a majority of the state’s residents, requiring nonessential work and gatherings to cease between 10 p.m. and 5 a.m. Meanwhile, the Centers for Disease Control and Prevention (CDC) advised Americans against traveling for Thanksgiving.

Disagreement Between Treasury and Fed Weighs on Sentiment

Weighing on sentiment Friday was a disagreement between the Treasury Department and the Federal Reserve over the continuation of funding for some of the emergency programs implemented during the recession.

Treasury Secretary Steven Mnuchin is seeking to end a handful of the Fed facilities that bought corporate bonds as well as the Main Street Lending Program targeted towards small- and medium-sized businesses. The move has drawn pushback from the central bank, which said the programs continue to serve an important role to support the vulnerable economy.

Mnuchin defended the decision to let the programs expire at year end and noted the Treasury could reactivate them. “We have plenty of capacity left,” he said.

Mnuchin told CNBC’s Jim Cramer on Friday that people were misunderstanding this decision, adding there is still plenty of money to provide funding if needed.

“This was a very simple thing. We’re following the intent of Congress,” Mnuchin said on “Squawk on the Street.”

Mnuchin’s comments that remaining money could be used for grants rather than loans suggested that “this could be an avenue to a targeted fiscal stimulus deal in the lame duck session,” said Yousef Abbasi, global market strategist at StoneX, a global financial services firm.

Mnuchin also said Republican leaders will discuss a plan to push through targeted fiscal stimulus with the help of Democrats.

For a look at all of today’s economic events, check out our economic calendar.

Published by

James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.