Wall Street's mini-rally lost steam Wednesday, as negotiations for the $2 trillion stimulus package that seemed a done deal shuddered to a halt.
The Dow Jones Industrial Average, which had gained 1,200 points earlier in the day, tumbled in the last few minutes of trading after Sen. Bernie Sanders, I-Vt., said he would “put a hold on this bill until stronger conditions are imposed on the $500 billion corporate welfare fund.” Sanders was objecting to opposition from four Republican senators to a key measure in the bill.
The S&P 500 ended the day up by just over 1 percent, down from session highs of 5 percent. The Nasdaq was down by 0.5 percent.
The historic deal on emergency economic relief was reached in the Senate in the early hours of Wednesday morning after mammoth negotiations and two failed attempts to get legislation approved. President Donald Trump will "absolutely" sign it if Congress passes it, Treasury Secretary Steven Mnuchin told reporters.
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"In effect, this is a wartime level of investment for our nation," Senate Majority Leader Mitch McConnell, R-Ky., announced from the Senate floor shortly before 2 a.m. Wednesday. "After days of intense discussions, the Senate has reached a bipartisan agreement on a historic relief package for this pandemic."
While the exact details of the bill are not yet known, lawmakers indicated Tuesday that it would include roughly $100 billion in assistance for hospitals; $350 billion in assistance to small businesses; $500 billion in aid for corporations, including airline companies and cruise lines, that have been hurt by the outbreak; and about $150 billion for state and local stimulus funds.
Unemployment insurance would also be significantly bolstered and include people who typically do not qualify, such as gig economy workers, furloughed employees and freelancers. The maximum state unemployment benefit has been raised to $600 a week.
This last provision has proven a sticking point for Sens. Tim Scott, R-S.C., Lindsey Graham, R-S.C., and Ben Sasse, R-Neb., who said the bill could provide a "strong incentive for employees to be laid off instead of going to work" because some people could theoretically make more by being unemployed.
A Democratic Senate Finance Committee aide said Tuesday a uniform payment was necessary to avoid bogging down states to deliver individualized benefits. A Republican aide on the Senate Finance Committee said Wednesday the policy stands and the text of the bill is unlikely to change.
The stimulus package is the third round of government emergency action, after Congress approved an $8.3 billion bill for health agencies and a roughly $100 billion bill that includes free coronavirus testing, unemployment benefits and food assistance for affected Americans.
"Elected leaders have now followed the Federal Reserve into 'whatever it takes' mode," said Mark Hamrick, senior economic analyst for Bankrate. "In the days and weeks ahead, economic data will enumerate the devastating financial toll of the crisis threatening lives and livelihoods. Helping to mitigate that impact ... should provide a much-needed inoculation of hope for Americans."
The Federal Reserve has slashed interest rates twice this month as part of emergency action to stimulate an economy ravaged by the coronavirus pandemic, in addition to injecting billions of dollars into the financial system to boost credit flow, backstop businesses and support the dollar.