Stimulus Increase Blocked

Uncertainty around the forthcoming US fiscal stimulus package remains elevated this week. Following a U-turn by Trump over the weekend, who first suggested he would veto the bill before signing it last minute, the president then pushed for direct stimulus cheques to be increased from $600 - $2000. The motion was subsequently passed through the House of Congress in a vote on Monday. However, Senate Minority leader Chuck Schumer's attempts to quickly pass the the bill through the Senate by unanimous consent were foiled by Mitch McConnell, the Senate majority leader.

Counter-Offer From McConnell

Following his blocking of the Schumer's action, McConnell then said that the Senate would back an increase in stimulus checks as part of a bill tied in to two other elements; the repeal of section 230 (reworking legal protection for online companies regarding user content) and an investigation into electoral fraud. Both these elements have been key features of Trump's outrage following his election defeat to Joe Biden.

However, it has not yet been clarified when or if the bill will be brought forward for a vote. Senate minority leader Chuck Schumer has also said that should the bill be brought forward for a vote, given the add-ons, Democrats will not vote for it and so it is a "blatant attempt" by McConnell to ensure the stimulus increase is not passed.

Trump Reaffirms Support For Stimulus Increase

Trump meanwhile, has rallied against the move. Writing on Twitter, the president said: "Unless Republicans have a death wish, and it is also the right thing to do, they must approve the $2000 payments ASAP. " However, the Republican party, which has called for a lower stimulus amount from the beginning of discussions seems unlikely to vote for the increase given its concerns over the growing deficit. The increase in stimulus would require a further $464 billion which many leading members of the party have already voiced their opposition to.

Despite the uncertainty around the increase, with the original $900 billion package (including 100 million direct cheques for $600) still in play, equities markets remained broadly well supported this week with the S&P sitting just off the all-time highs posted yesterday.

Technical Views

S&P500

For now, the S&P remains atop the 3714.50 level and, while above here, the near term bias remains bullish. Momentum studies are flagging bearish divergence, however, which raises the risks of a reversal lower. Below the 3714.50 level, the next support is the 3586 level.

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