Dow Jones, S&P 500 and Nasdaq futures halted for third straight week
Bipartisan disagreements over a coronavirus stimulus plan worth roughly US$2 trillion caused US futures to hit their maximum decline allowances once again.
US stock futures triggered a trading halt for the third straight week as they hit a 5% level one limit down yet again at 6.30pm Eastern Time on Sunday 22 March.
Dow Jones Industrial Average (DJIA) futures dropped 954 points in early Asian trading hours, while S&P 500 and Nasdaq futures also declined nearly 5% each. All three indexes were still down over 4% when trading resumed.
Prices began to fall as it became increasingly clear that a roughly US$2 trillion stimulus bill to help the US combat the economic impacts of the coronavirus would not be getting enough upticks in a Senate procedure vote for it to be passed.
The voting disagreement: not enough emphasis on workers
Democrats had earlier stated that the Republican ‘version’ of the bill prioritised businesses over workers and did not do enough to help workers.
The key points of contention included equity buyback policies, executive compensation, unemployment insurance, as well as employee protections.
When asked if a deal would be reached earlier in the day, House of Representatives speaker and Democrat politician Nancy Pelosi told reporters: ‘From my standpoint, we’re apart’, adding that the Democrats will be introducing their own bill that will ‘hopefully be compatible’.
National Economic Council Director Larry Kudlow said a day earlier that the fiscal rescue package will likely amount to over US$ 2 trillion, equivalent to about 10% of the country’s economic output. If approved, this would be more than double the amount first proposed and hinted at by President Donald Trump on 11 March.
Among the proposed items on the stimulus bill are payroll-tax holidays for small businesses, the White House Economic Advisor added.
Nevertheless, the voting deadlock brings things ‘back to square one’, said US Senate Majority Leader and Republican member Mitch McConnell. He added that he plans to start a new round of voting at 9.45am – 15 minutes after the US markets open on Monday 23 March, if no deal is reached by then.
Third coronavirus-related spending programme in a month
This latest economic relief plan would become the third coronavirus-related spending programme in the last one month. Last Wednesday 18 March, Trump approved a US$100 billion plan which includes provision for emergency paid leave, unemployment benefits, as well as free Covid-19 testing for workers.
The US President had also signed off on a coronavirus research and healthcare plan worth an estimated US$8.3 billion on 06 March, in a bid to ramp up prevention and vaccine research efforts.
Last Sunday 15 March, the US Federal Reserve – the country’s central bank – also slashed interest rates in an emergency move, by 100 basis points to a range of 0% to 0.25%. This is the country’s lowest interest rate level since 2015.
The cut followed a half percentage point rate reduction already rolled out on 03 March. The previous target range was 1% to 1.25%.
Following that announcement, US futures had also tumbled over 5% to trigger circuit breakers that brought trading to a standstill.
Then when regular trading resumed on Monday 16 March, the S&P 500 index and DJIA indexes crashed 11.98% and 12.93% respectively on the day, the largest one-day drops since 1987’s infamous Black Monday.
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