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Risk Sentiment Weak as Fiscal Spending Bill Is Finalized

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Stocks fell Monday as selling in tech resumed ahead of earnings and cyclicals were mixed after Congress unveiled its latest round of fiscal stimulus. 

The S&P 500 fell 0.3%, dragged down by the tech-heavy Nasdaq, down as much as 0.43%. The 10-Year Treasury yield fell to 0.6%. Yields fall when prices rise. 

The NYSE FANG Index was down a few tenths of a percentage point, as investors grow wary ahead of tech earnings. Big tech had enjoyed an explosive run up for the past few months as coronavirus tailwinds are expected to accelerated already-in-place growth trends like e-commerce, cloud and streaming. But some stocks may be overextended and the sustainability of those growth trends is in question. Plus, Facebook  (FB)  and Google  (GOOGL)  are impacted by the weak economy in their ad businesses. 

"It is worth noting that downside risks prevail as the tech earnings could have been hit by a sharp drop in advertisement revenues in the second quarter,” wrote Ipek Ozkardeskaya, senior analyst at Swissquote Bank in emailed remarks to reporters. 

Republicans revealed their $1 trillion stimulus bill that would include cutting the $600 weekly unemployment supplement down to $200 a week, and send $1,200 payments to most Americans. Some investors may be concerned this is not enough to support consumer spend, holding the consumer over until a vaccine emerges. Consumer confidence, pressured of late, may not see a jolted as unemployment remains elevated. Investors had been worried about the political will for a sufficient bill. 

Cyclicals were mixed. Large cap oil and banking were down 0.5% and 0.3%, respectively. Consumer discretionary rose slightly, while industrials fell 1%.  

McDonalds  (MCD)  fell more than 1% to $198 a share, after beating revenue estimates and missing earnings on surging operating costs and offering no guidance. Most stores are opened and the massive sales declines improved in the second half of the quarter, but visibility is lacking and the stock had run up for a month into earnings. 

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