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The U.S. stock market (Dow Jones Industrial Average) closed around 27147.70 Monday, tumbled almost -1.84% (-510 points), but fades the low (26715.15) on tech boost. On early Monday, Dow plunged almost -950 points amid less dovish Fed hold, U.S.-China digital/tech war, U.S. political/election uncertainty, global money laundering allegations involving big banks and rising coronavirus infections (big 2nd wave) across Europe resulting in new restrictions and lockdowns. There was a global risk aversion amid the concern of corona lockdown 2.0 in Europe and as the U.S. CDC warned ‘erroneously’ late Friday that the COVID-19 is airborne, could spread through the air beyond 6-ft not just through close person to person contact as initially supposed.
The U.S. CDC's late Friday COVID-19 guidance noted:
There is growing evidence that droplets and airborne particles can remain suspended in the air and be breathed in by others, and travel distances beyond 6 feet (for example, during choir practice, in restaurants, or in fitness classes). In general, indoor environments without good ventilation increase this risk. People should stay at least 6 feet away from others, whenever possible, and continues to wear a mask and routinely clean and disinfect. People should also stay home and isolate when sick, and use air purifiers to help reduce airborne germs in indoor spaces.
The SARS-COV-2 virus also spreads through respiratory droplets or small particles, such as those in aerosols, produced when an infected person coughs, sneezes, sings, talks, or breathes. Airborne viruses, including COVID-19, are among the most contagious and easily spread. These particles can cause infection when inhaled into the nose, mouth, airways, and lungs. This is thought to be the main way the virus spreads.
The Friday CDC update also changed the language about the asymptomatic transmission nature, shifting from the old language ‘some people without symptoms may be able to spread the virus’ to ‘people who are infected but do not show symptoms can spread the virus to others’. Basically, both languages are almost the same.
But on mid-Monday, Dow got a boost after the CDC apparently corrected itself and said:
A draft version of proposed changes to these recommendations was posted in error to the agency’s official website. CDC is currently updating its recommendations regarding the airborne transmission of SARS-CoV-2 (the virus that causes COVID-19).
The U.S. CDC has long maintained that the coronavirus may be transmitted through droplets spread among people in close proximity to one another and through respiratory droplets produced when an infected person coughs sneezes or talks. The last guidance no longer says COVID-19 can be spread through the air, and the agency said it will update the language once its review process has been completed.
The CDC credibility maybe now at stake due to frequent flip-flops as the agency may be acting on politics (Trump’s pressure) rather than science and data for its COVID-19 pandemic response. The CDC said the guidance posted Friday was a ‘draft version of proposed changes’ and it’s still not clear if that draft will eventually become the CDC's guidance, or if it will go through additional changes.
Now from the COVID war to the digital war front, China asked the U.S. to stop discriminating against Chinese companies. And China also threatened retaliatory action against U.S. techs/MNCs by releasing the so-called Unreliable Entity List (UEL). The market is concerned about the growing U.S.-China tech/digital war, which may affect big U.S. techs, have a big market in China. Thus, China's sensitive techs and other MNCs are in pressure, dragging the overall market.
But on mid-Monday, Dow recovered from the session low as techs (Nasdaq) bounced back after a report that Chinese leaders are divided over releasing a UEL of U.S. companies. Some leaders in CCP (policy doves/reformist) are hesitant to issue the retaliatory list of U.S. tech companies to target, arguing publication should wait until after the U.S. election. Although China is against complete decoupling with the U.S., it’s also working hard to end the tech reliance on the U.S.
There is lingering uncertainty over CARES Act 2.0 and after Supreme Court Justice Ginsburg’s death; there may be also added suspense over a stopgap funding bill to avoid another U.S. government shutdown (partly). The Partisan battle over the Supreme Court Judge nominations puts end to a bleak chance of CARES Act 2.0 and also threatens the government shutdown bill. Both parties will not sit down across the table and compromise, either over CARES Act 2.0, Ginsburg’s replacement or even the stop-gap (CR) funding bill.
But Dow was also buoyed after another report that the House Democrats was expected to move Tuesday to pass a spending bill that would keep the government running through 11th Dec, but without farm-aid funds sought by the White House (Republicans), that Democrat negotiators had earlier agreed to ‘in principle’. The 11th Dec end date of the continuing resolution (CR) would also be a win for the GOP (Trump) after Democrats (Pelosi) tried for a February extension which could give them more leverage over final spending bills next year.
The House and Senate negotiators reportedly reached a tentative deal on stopgap funding legislation to tide over the crisis. The continuing resolution (CR) will contain the Commodity Credit Corporation (CCC) funding anomaly sought by Trump and extend an expiring program that enables low-income families with children who receive free and reduced-price school meals to receive food while schools are closed (mid-day meal scheme).
In any way, the lingering uncertainty continues amid growing political war at the Capitol Hill, just ahead of the Nov election. The risk trade is under stress on possible U.S. political uncertainty and policy paralysis after the Nov election too. In his Sep monetary policy meet last Wednesday, Powell repeatedly stressed on additional fiscal stimulus, especially for the vulnerable people and stressed business to continue the economic recovery and also warned various negative consequences in the absence of targeted CARES Act 2.0.
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