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Illustration: Sarah Grillo/Axios

The fight over a new Supreme Court justice will take Washington's partisan bickering to a new level and undermine any chance for needed coronavirus relief measures before November's election, Wall Street analysts say.

What we're hearing: "With the passing of Justice Ginsburg, the level of rhetorical heat has increased, if that seemed even possible," Greg Staples, head of fixed income for the Americas at DWS Group, tells Axios in an email.

  • "What little time is left on the Congressional calendar ... will be focused on Trump’s Supreme Court nominee."
  • "We now view the chances of a new stimulus package prior to the election to be effectively zero."

Why it matters: In a speech released ahead of his appearance before a congressional committee today, Fed chair Jerome Powell notes consumer spending has recovered about 75% of its decline and only about half of the 22 million jobs lost earlier this year have returned.

  • "This reversal of economic fortune has upended many lives and created great uncertainty about the future," Powell writes.
  • To provide assistance to many Americans "direct fiscal support may be needed."

Be smart: Further spending from Congress has been baked into Wall Street expectations for months and fund managers now may have to reassess their outlooks.

  • "Markets had embedded substantial optimism in early September, with the valuation of the S&P 500 at the highest level in 20 years and sentiment at extreme highs, setting the stage for a natural period of consolidation," says Mark Hackett, chief of investment research at Nationwide.
  • "Investors are now struggling to find a positive catalyst, as the prospect for fiscal stimulus fades, economic data begin to reflect rising coronavirus cases and earnings season remains a month away."

What happened: The S&P 500 and a gauge of stock markets around the globe both fell to their lowest levels in about two months Monday.

  • Tech shares, seen as less impacted by the direction of the economy, held up much better than economically sensitive sectors, with the Nasdaq down 0.1% on the day and the Russell 2000 small cap index off by 3.4%.

Between the lines: The stimulus matters to the market, but is much more important to the real economy where in addition to reduced jobs and spending, bankruptcies are rising at the fastest pace since 2010 and many small businesses warn they could run out of cash before year end.

The bottom line: "The downturn has not fallen equally on all Americans; those least able to bear the burden have been the most affected," Powell says in the text of his speech.

Go deeper: The price of Washington's stimulus failure

Go deeper

Dion Rabouin, author of Markets
Dec 23, 2020 - Economy & Business

Vaccines and strong economy could mean inflation in 2021

Expand chart
Data: Federal Reserve Bank of St. Louis; Chart: Axios Visuals

With nearly $3 trillion in lending from the Fed this year, and Congress approving $900 billion in debt-financed spending on top of the $3.1 trillion budget deficit in fiscal year 2020, inflation hawks are sounding the alarm.

Why it matters: “Inflation staying low and well-behaved is the foundation on which everything in markets is currently priced,” Karen Ward, chief market strategist for Europe at JPMorgan Asset Management, told FT.

Housing and consumer confidence sputter

Data: NAR; Chart: Axios Visuals

Momentum in the housing market is slowing, just as consumer confidence is also showing weakness.

Why it matters: Year-end economic data tells a familiar 2020 tale of the haves and the have nots staking out their positions in the final months of the year.

Dec 23, 2020 - Politics & Policy

Pelosi on Trump's call to increase stimulus payments: "Let's do it!"

Photo: Tasos Katopodis/Getty Images

House Democrats responded to President Trump's call to increase stimulus payments to $2,000 per adult by saying they're ready to bring the measure to the floor by "unanimous consent" this week.

Driving the news: Trump indicated in a video Tuesday evening that he won't sign the $900 billion coronavirus relief bill and $1.4 trillion government funding measure passed by Congress if it's not amended to increase stimulus payments.