Stocks pared losses as lawmakers passed a one-week government spending bill to avert a shutdown. Equities still headed toward their worst week since October as the impasse over fresh stimulus signaled slimmer chances of an imminent deal.
As coronavirus cases swept across the nation, concern about tougher restrictions also kept investors on edge. Most major groups in the S&P 500 retreated as a gauge of equity volatility extended its surge into a third day. Apple Inc. and Intel Corp. dragged down the Nasdaq 100 and Tesla Inc. tumbled on an analyst downgrade. The KBW Bank Index slumped about 2%. Walt Disney Co. soared to an all-time high after a bold forecast for its new streaming services. The yield on the two-year Treasury note was near record lows.
With the clock ticking down on a relief package as lawmakers approach their year-end break, bipartisan talks are hung up on differences between Republicans and Democrats on shielding companies from virus-related lawsuits. While both sides are closer than ever to agreeing on a price tag for a stimulus measure — coalescing around a $900 billion figure — there’s no sign they can get a deal anytime soon. In the meantime, the U.S. appears poised to cross 300,000 Covid-19 deaths in the next week, a sign of the unprecedented gravity of the pandemic as states prepare for their first vaccinations.
“It’s essential that Congress puts aside differences and finds agreement on a stimulus program before the end of the year,” said Craig Erlam, senior market analyst at Oanda. “Lawmakers are running out of time.”
Earnings estimates for the next two years make U.S. stocks look more costly in historical terms than just one year’s worth of projections, or even past results.
The S&P 500 closed Thursday at 26 times earnings, using a gauge that takes estimates for the longer time period into account. That’s close to the Sept. 2 ratio of 27.2, the highest since data compiled by Bloomberg starts in 1990. This indicator was cited by Jeffrey Gundlach, chief executive officer of DoubleLine Capital LP, in a presentation Tuesday. The benchmark hasn’t set a similar high relative to the past year’s earnings or next year’s estimates.