S&P 500 May Suffer Further Losses amid Fading Hopes of Stimulus Bill

WikiFX News (28 Oct.) - Despite the positive earnings data released recently, risk aversion is raging the market amid the pre-election jitters and fading fiscal stimulus hopes, with the U.S. benchmark S&P 500 index falling 5% from the monthly high of 3,541 on Tuesday.

Among the 145 S&P 500 companies that have reported third-quarter profits, there are 120 beat expectations for earnings, while 108 beat sales estimates.

With the U.S. presidential election approaching, the provision of much-needed fiscal support before the election appears almost impossible, considering the Senate set to leave for break after successfully confirming Supreme Court nominee Amy Coney Barrett.

Fed governor Lael Brainard stated that “apart from the course of the virus itself, the most significant downside risk to my outlook would be the failure of additional fiscal support to materialize”; while Fed Chairman Jerome Powell said that the absence of “an additional pandemic-related fiscal package” could see growth “decelerate at a faster-than-expected pace in the fourth quarter.”

With that said, the S&P 500 index could extend its declines ahead of the election if investors reduce their exposure to risk-associated assets.

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Chart: Trend of SPX Index