On days when Wall Street focuses on the likelihood of Congress passing a new $1.9 trillion coronavirus stimulus/relief package, stocks rally. Why not? What’s not to like, in the short term, about putting $1.9 trillion into the economy?
On days when Wall Street focuses on all the heavy lifting that it take to pass such as bill and on Republican opposition to the package stocks waver as they did last Friday.
And on days like today when Wall Street can’t decide what it thinks about the prospects for the Biden administration’s coronavirus package, stocks dither.
Today the Standard & Poor’s 500 was up 0.36% at the close but the Dow Jones Industrial Average fell 0.12%. The technology-heavy NASDAQ Composite climbed 0.69% and the Big-Tech dominated NASDAQ 100 gained 0.87%. The small cap Russell 2000, which has been very sensitive to sentiment on the overall U.S. economy, fell 0.50%.
Biggest news of the day came from new Senate Majority Leader Chuck Schumer of New York. Schumer said that he and the Democrats would push ahead to approve the Biden proposal using a process called reconciliation that allows the Senate to pass budget legislation by by-passing the Senate filibuster with its need for a 60-vote majority. (Democrats “control” the Senate with a 50-50 split and the tie-breaking vote of Vice-President Kamala Harris.)
On the one hand, Schumer’s determination to press ahead is good news for a market looking to a coronavirus package to boost the economy. It’s extremely likely that the usual Senate wheeling and dealing will be able to produce 50 or more votes for the package after some degree of compromise.
On the other hand, the reconciliation process is cumbersome requiring legislation to jump through time-consuming procedural votes. That would make March the earliest that Congress could pass a new coronavirus package, according to Schumer. And the rules of the reconciliation process would require Democrats to strip out any provisions that don’t affect the federal budget math. So adding $1,400 to the $600 in direct payments to individuals would probably survive the process and the calculations of score-keepers. But the proposal to raise the Federal minimum wage to $15 an hour probably wouldn’t–since it doesn’t add or subtract from the budget.
I’d expect the coronavirus stimulus/relief news to exhibit this “mixed” nature over the coming weeks and months as Congress moves through a process with lots of stops and starts.
