Stocks slid from record highs in volatile trading on Friday as lawmakers struggled to bridge disparities on additional measures to stimulate the coronavirus.
The Dow Jones Industrial Average fell 124.32 points, or 0.4%, to 30,179.05. At its session low, the 30-stock benchmark lost more than 270 points. The S&P 500 fell 0.4% or 13.07 points to 3,709.41 while the Nasdaq Composite lost 0.1% or 9.11 points to 12,755.64. All three indices hit new intraday highs earlier in the day after the records close in the previous session.
Leaders on Capitol Hill said they were on the verge of an agreement that would provide $ 900 billion in additional aid. The month-long talks are about to begin, and federal funds will run out on Saturday at 12:01 a.m. ET.
Senate Majority Leader Mitch McConnell, R-Ky., Said Friday that negotiations “remain productive”. “In fact, I am even more optimistic now than last night that a bipartisan, bicameral framework for a major bailout is very close,” he added.
House Majority Leader Steny Hoyer, D-Md., Said that afternoon that the Chamber would be on hiatus until 5 p.m. while leaders of Congress try to get a “clearer picture” of how to move forward. He urged representatives to keep Friday evenings, Saturday and Sunday free.
Last-minute disputes preventing Congress from passing an aid agreement include direct payments, small business loans and an increase in unemployment insurance.
Big volume
The stock market saw massive volume on Friday as Tesla’s historic entry into the S&P 500 will be based on close of trading prices. There has been a rush of activity on the final bell and the S&P 500 will start trading with Tesla as a member on Monday.
With a market cap of more than $ 600 billion after rallying 700% this year, the electric car maker is named the 7th largest company in the index.
Tesla is added to the benchmark in one fell swoop, marking the biggest realignment of the S&P 500 in history. It is estimated that passive funds tracking the S&P 500 will need to buy more than $ 85 billion of Tesla, while $ 85 billion of the rest of the index will need to be sold to make room for it.
Tesla shares rose up to 4%, hitting an all-time high on Friday before closing just 0.4% higher. More than 181 million shares of Tesla changed hands, quadrupling the average 30-day volume.
Several large exchange-traded funds such as Invesco QQQ Trust (QQQ), which mirrors the Nasdaq 100, are being rebalanced alongside the S&P 500 Friday.
Meanwhile, Tesla’s inclusion coincides with a quarterly event known as Quadruple Sorcery, when options and futures expire on indices and stocks. Many expect Friday to be one of the busiest trading days of the year.
Winner Week
The main averages posted gains for the week despite Friday’s weakness. The Dow was up 0.4% for the week. while the S&P 500 was up 1.3% in its fourth positive week in five years. The tech-heavy Nasdaq outperformed the week, up 3.1%.
Shares rose earlier this week on optimism about a stimulus deal and the launch of the vaccine. On Thursday evening, Food and Drug Administration advisors overwhelmingly backed Moderna’s Covid vaccine, a major step towards FDA approval for public distribution. The first vaccinations in the US were given on Monday with the vaccine from Pfizer and BioNTech.
Investors are betting that an increase in Covid cases and disappointing economic data would force lawmakers to cement a new aid package. Unemployment claims reached their highest level since early September last week, while retail sales fell more than expected in November.
“The bad news this week is that the third wave is worsening and the economic damage from the pandemic continues to worsen,” said Brad McMillan, chief investment officer at Commonwealth Financial Network. “The good news is that policymakers are starting to contain the virus and the federal government is likely to put in place a stimulus package that will mitigate both of the main risk factors.”
McMillan said investors should expect higher volatility in the short term amid developments in the stimulus and vaccines space before the economy returns to growth in 2021. “With vaccines now available and rampant, we are at the end of the start of the pandemic and the markets are realizing that,” he added.
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