US stocks slip as Treasury clashes with Fed to cut loan programmes
US stocks slipped in early trading while global markets were subdued as rising coronavirus cases and a rare disagreement between the Federal Reserve and Treasury worried investors.
Treasury secretary Steve Mnuchin yesterday requested that the Fed wind down a series of coronavirus lending facilities put in place to support companies at the start of the pandemic.
The move drew a disappointed response from the Fed, which said it “would prefer” that the measures stay in place. It marked a rare public disagreement between the central bank and the Treasury.
Many investors said they were unnerved by the Treasury’s move. Atlanta Fed president Raphael Bostic told Bloomberg TV: “It is prudent to keep those things open so that when people, if they do have stress, can draw upon it.”
Wall Street shares fell at the open. The S&P 500 was down 0.3 per cent, while the Dow Jones fell 0.4 per cent. The tech-heavy Nasdaq was 0.2 per cent lower.
The fall in shares came despite an announcement from Pfizer that it would request emergency use authorisation for its vaccine from US authorities.
FTSE 100 hovers in the green on vaccine hopes
Markets have been riding high in November after Pfizer and Biontech and Moderna’s vaccines proved to be more than 90 per cent effective.
The FTSE 100 remained in the green in afternoon trading. It came down from earlier highs to sit 0.4 per cent higher at 6,359 points.
In Germany, the Dax was up 0.4 per cent, while the Europe-wide Stoxx 600 was also 0.4 per cent higher.
Gains were capped by worries over rising coronavirus cases. The Treasury-Fed disagreement was also on investors’ minds, as was the ongoing presidential election saga.
Mnuchin yesterday wrote to the Fed to request it returned unused funds from five programmes. The loan schemes were set up under the so-called Cares Act earlier this year.
The Treasury secretary said the $445bn (£335bn) allocated to the funds should be made available for other things. Most of the money has not been used.
Yet the Fed said it “would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy”.
US Chamber of Commerce chief policy offer Neil Bradley said the termination was a “surprise”. He said it “prematurely and unnecessarily ties the hands of the incoming administration”.