Dow Falls as Lawmakers Struggle to Find Breakthrough on Stimulus

By Yasin Ebrahim

Investing.com – The Dow retreated Friday, as stimulus negotiations look set to drag on into the weekend on differences over the Federal Reserve's use of emergency lending powers.

The Dow Jones Industrial Average fell 0.41%, or 124 points. The S&P 500 was down 0.19%, while the Nasdaq Composite slipped 0.07%. All three indexes closed higher for the week.

In a sign that outstanding issues remain on stimulus talks, Senate Majority Mitch McConnel is reportedly seeking to propose a two-day stopgap funding fill to keep the government open and buy more time to get a deal over the line, Politico reported.

Republicans reportedly want to curb the Federal Reserve's use of emergency lending powers, while Democrats want to grant the central bank more leeway to carry out the measures, casting doubt on hopes a deal would be sealed by the end of the day.

GOPs believe the Fed's use of emergency lending programs has pushed the central bank to operate beyond its monetary policy purview.

President Donald Trump supports the Republican efforts to rein in the Fed's power.

"We are strongly in support of Senator (Pat) Toomey’s view with respect to the Treasury emergency funds," National Economic Council Director Larry Kudlow told reporters, according to Reuters.

House Nancy Pelosi reportedly twice delayed her press conference on the progress of stimulus, adding to investor jitters.

The day of red on Wall Street was led by value stocks – those tied to the progress of the economy – with real estate and consumer discretionary stocks among the biggest decliners.

Energy stocks were not far behind, falling more than 1% as the threat to demand of fresh restrictions to curb rising Covid-19 cases weighed on sentiment.

In the US, coronavirus cases topped 17 million, with more than 3,600 deaths recorded on Thursday. But help in the battle against the pandemic appears to be on the way as the Food and Drug Administration is expected to approve Moderna (NASDAQ:MRNA)'s coronavirus vaccine emergency use authorization.

In tech, Intel (NASDAQ:INTC) closed 6.3% lower on fears over a further dent in its chip business as Microsoft (NASDAQ:MSFT) is reportedly set to design its own chips for servers and surface PCs, according to Bloomberg.

Industrials, meanwhile, were held back by a 5% plunge in FedEx Corporation (NYSE:FDX) after the shipping giant's lack of guidance and weaker than expected margins in its ground business offset better-than-expected second-quarter results.

In other news, Tesla (NASDAQ:TSLA) hit a record high of $684.74 before paring some gains to trade about 1.5% higher as the electric car maker joined the S&P 500 index after the markets close.

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"We believe the sustained profitability trajectory as evidenced in the September quarter was the final straw that got Musk & Co. into the S&P 500 this time around despite all the noise around tax credit boosts on the Street," Wedbush said in a note.

In the after-market hours, banking stocks surged as the Federal Reserve said it would allow banks to buyback stocks and pay out dividends as its stress tests suggested banks had "strong capital levels." The Fed's stress tests estimated that banks had enough capital to cover $600 billion of losses in a sudden economic downturn. 

JPMorgan Chase & Co (NYSE:JPM), Bank of America (NYSE:BAC), and Citigroup Inc (NYSE:C) jumped more than 5% higher in after-hours trade.