Stocks drifted lower on Friday, as optimism about President-elect Joseph R. Biden Jr.’s plans to spend heavily to address the impact of the pandemic gave way the hard realities of getting the plan through Congress.
The S&P 500 fell as much as 1 percent before recovering some ground. By midday the benchmark was about half a percent lower.
Mr. Biden outlined a plan for $1.9 trillion in spending on Thursday night that he said would address the “real pain overwhelming the real economy.” It includes money to quicken the rollout of the coronavirus vaccine, help for state and local governments to address budget shortfalls, more generous jobless benefits and direct payments of $1,400 to individuals.
On Wall Street, analysts viewed Thursday’s announcement as the starting point for negotiations and political wrangling that will almost certainly produce a more modest package.
Democrats have said they would like to pass the plan through the Senate in a “regular order” vote, which would require 60 votes. But after the Democratic victories in Georgia’s Senate runoff elections earlier this month Democrats will hold only 50 seats in the Senate.
“We do not expect ten Republicans to support a $1.9 trillion relief package,” wrote analysts with Goldman Sachs.
That leaves a so-called budget reconciliation vote in the Senate that would require only Democrats to win a simple majority. But parliamentary rules limit size and type of bills that can be passed using the budget reconciliation process.
“Our back-of-the-envelope calculation suggests that more than half of the spending proposals put forward last night do not meet the budget reconciliation requirements,” wrote analysts with Strategas Research.
Investors expressed some disappointment that Mr. Biden’s plan seemed to push off action on infrastructure spending. Stocks that had soared on expectations for a traditional road and bridge — such as U.S. Concrete and civil construction contractor Granite Construction — both fell.
Other areas of the stock market including energy stocks, banksand industrials, which rise and fall based on expectations for economic growth over the relatively short term, slipped on Friday.
As virus cases keep climbing in many parts of the world, anticipation of Mr. Biden’s spending plans have helped keep stock benchmarks in the United States close to record levels.
Those gains have come even as fresh data shows the economic damage being done by the pandemic. On Thursday, it was a report that more than one million people in the United States filed for unemployment benefits last week. On Friday, the Commerce Department said retail sales fell for a third-straight month in December, despite the holiday shopping season.
But investors are also looking closely at the enormous amount of borrowing that will be necessary to finance Mr. Biden’s proposal. Already, Treasury bonds have sunk in value, and their yields risen. As yields inch up, borrowing costs will rise. That has also raised concerns about tax increases to help underwrite Mr. Biden’s proposal.
