Stimulus: Dow Drops 400 Points After Donald Trump Calls off Talks

On Tuesday, President Donald Trump announced on Twitter that he had instructed his administration to stop negotiation a new stimulus check, and market indexes plummeted within minutes. According to a report by CNBC, The Dow Jones Industrial Average closed over 400 points down by the end of the day. This left analysts with serious fears about where the economy is headed in the next few months.

Trump tweeted that he had "instructed my representatives to stop negotiating until after the election," having rejected the latest compromise offer from Democrats. He added that he had advised the Republican-controlled United States Senate to ignore any further stimulus talks and focus on confirming his Supreme Court appointee instead. If Trump's tweet comes to fruition, there will likely be no new economic stimulus until late in November at the earliest, considering how long it will take to tally the results of the 2020 presidential election.

Trump's tweet came at 2:48 p.m. ET, and within 15 minutes there were noticeable shifts in the market. In addition to the Dow, the Nasdaq Composite reportedly dropped by 1.6%, and the S&P 500 fell as well. The Dow, in particular, was fairing well on Tuesday before Trump's tweet.

The stimulus announcement took a particular toll on the airline industry, which was relying on the next stimulus bill for major financial aid. With travel grinding to a near halt around the world, the massive companies are struggling to pay their employees, and both Republican and Democrat plans had included at least some aid for airlines.

It will now come down to who sweeps and how much stimulus we get and what it looks like under either a Republican or Democratic Congress/President," Dennis DeBusschere told CNBC. DeBusschere is a quantitative strategist at Evercore ISI, and he said: "For now... the sweep scenario clearly favors the Dems. That is why unwinding stimulus trades should not be taken too far."

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Trump has faced widespread criticism for trying to halt stimulus negotiations to focus on the election, and for doing so via Twitter. The president spent much of Tuesday on Twitter while working in isolation because he has COVID-19. According to a report by Vanity Fair, the treatments Trump is receiving are likely affecting his mood and his temperament, raising concerns about his habit of making broad announcements online.

The U.S. Congress does not necessarily need to obey Trump's mandate to halt stimulus check negotiations, though analysts assume they will. Although the legislatures could pass a bill without his permission, Trump indicated that he would not sign it into law if they did.