A single tweet on Tuesday from the most powerful person in the free world sent stocks tumbling.
President Donald Trump accused Speaker of the House Nancy Pelosi of “not negotiating in good faith” and instructed White House representatives to cease stimulus talks in a tweet published in the afternoon.
The Dow Jones Industrial Average, which posted positive gains earlier in the day, sank 2% after the announcement. The Nasdaq Composite and the S&P 500 experienced similar declines.
In the tweet, Trump wrote that stimulus negotiations will continue after the election. Senate Leader Mitch McConnell will instead focus on the Supreme Court vacancy, per Trump’s request.
Tom Block, a policy strategist with Fundstrat, told CNBC that Trump’s announcement was “disruptive” and “negative for the market.”
Before Trump’s announcement, renewed stimulus talks between Democrats and Republicans had lifted stock prices on Monday.
On Tuesday, Federal Reserve Chairman Jerome Powell urged lawmakers to provide a new round of stimulus because a potential second wave of coronavirus could “significantly limit economic activity.”
Speaking at the National Association for Business Economics annual meeting, Powell pressed Congress to enact more fiscal stimulus to help strugglings Americans because “too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses.”
“Once you're permanently laid off it's just difficult to get back into the workforce," Powell said.
With interest rates near zero, there isn’t much more for the Fed to do as the pace of the economic recovery slows down.
“Even if policy actions ultimately prove to be greater than needed, they will not go to waste,” Powell said.