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Stimulus Hopes Buoy Markets, But Final Bill Remains Elusive

  • Stock market rises on indicators that Democratic leaders and the White House may soon strike a deal on a new round of COVID-19 relief
  • Partisan differences have plagued efforts to pass more relief, though there is broad support for small business assistance and other components
  • Complications such as a postponement of the Senate calendar could delay aid further

The stock market closed higher on Monday as hopes for a deal on a new round of COVID-19 relief improved. However, the White House and Democratic leaders continued to debate what the final product might look like, and complications such as a delay in the Senate calendar are likely to delay any movement on a new relief package.

The Dow, S&P 500, and other market indicators all increased as both House Speaker Nancy Pelosi and President Donald Trump voiced their support for additional fiscal relief to support the economy. Markets received another boost later in the day after Trump announced he would be leaving the hospital after being treated for the coronavirus.

The uptick in the stock market comes after more sluggish activity in recent weeks due to fears of a slower economic recovery. Though markets have largely recovered after a steep crash at the outset of the COVID-19 pandemic, the unemployment rate is twice as high as it was this spring and economists have voiced concern that additional relief is necessary to avoid a drop in consumer spending and other factors that could spur a recession.

Pelosi and Treasury Secretary Steven Mnuchin have held frequent meetings recently to try to hash out an agreement. Before leaving for the October recess, House Democrats passed an updated $2.2 trillion version of the HEROES Act even though this is unlikely to pass muster in the Senate. Mnuchin has put forward a $1.6 trillion package. The proposals overlap in some areas, such as support for new stimulus checks and further funding for the Paycheck Protection Program.

While Pelosi has said she intends to reconvene the House to vote on a compromise bill if necessary, any newly approved aid package would also have to pass the Senate, which has been reluctant to support pricier relief bills. In addition, Senate Majority Leader Mitch McConnell recently postponed Senate business to Oct. 16 after three Republican senators tested positive for COVID-19.

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