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Stocks Falter Even House Proposes Large Stimulus Bill

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Stocks fell Tuesday after Congress proposed a potentially powerful new stimulus bill. Several headwinds are still moving against that positive.

The S&P 500 fell as much as 0.1%, with most sectors in the red, but the tech-heavy Nasdaq, up 0.1%, supporting the S&P 500. The 10-Year Treasury yield fell to 0.65%. The price of crude oil dropped 1.6% to $39 barrel.

First off, stocks rallied Monday is it became clear Congress was moving on a stimulus bill and the rally was lead by economically-sensitive stocks like oil and banks. The 10-Year Treasury yield, pressured by Federal Reserve buying of the bond and depressing inflation expectations, rose a tick.

Secondly, the bill is $2.2 trillion and — in a surprise twist - includes $1,200 stimulus checks to households, $600 in federal unemployment benefits and 120 billion in aid to the restaurant industry. 

These are meaningful amounts to households and small business who need cash, as businesses have not bene fully reopened and the unemployment rate is still at a very high 7%, even though it has dropped fast (partially on account of prior rounds of fiscal stimulus).

Oil, consumer discretionary and bank stocks were all down a hair. Bank of America  (BAC) - Get Free Report fell 0.3%.

Acting as a negative force against the stimulus bill is the possibility that the bill may have taken too long. If enough small businesses closed their doors in September of August, the unemployment rate may not fall as quickly as it has been.

Plus, new daily virus cases hit 55,000 in the U.S. after hitting 34,000 a month ago. Investors may have to grapple again with the unquantifiable tug-and-pull of states remaining not fully reopened against aggressive stimulus. 

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