US Treasury Secretary Steven Mnuchin on Wednesday said despite some progress, he still has not reached an agreement with Democratic lawmakers on a new stimulus package for the US economy.
"We continue to make progress on certain issues, on certain issues we continue to be far apart," Mnuchin said during a virtual appearance at an economics conference.
After advancing cautiously at the open, Wall Street returned to the red after Mnuchin spoke, with the Dow sinking 0.7 percent around 1625 GMT.
Democrats and Republicans have been stalemated for months over passing a new measure to restore expired provisions of the $2.2 trillion CARES Act approved as the coronavirus pandemic struck in March.
Mnuchin, who has been leading the negotiations on behalf of President Donald Trump, said he had a lengthy conversation with his Democratic counterpart, House Speaker Nancy Pelosi, on Wednesday morning.
But the two sides are unable to agree on how much to spend, or what form to spend it in, with Democrats demanding aid for struggling state and local governments that are at the front line of delivering aid.
"We continue to have discussions and try to compromise on a broader package," Mnuchin said, adding Pelosi rejected a stand-alone measure to fund airlines that have furloughed tens of thousands of workers this month.
"From our standpoint, the all or nothing approach doesn't make sense," he said, echoing comments from Republican Senate Majority Leader Mitch McConnell that passing an expensive spending package is increasingly unlikely as the November 3 presidential election draws near.
Democrats want to enact a broad measure costing $2.2 trillion, while the Trump administration raised its latest offer to $1.8 trillion.
McConnell on Tuesday said he would move to pass a bill allocating money to a now-lapsed program of loans and grants to small businesses, but Democrats controlling the House of Representatives say they will only pass a larger package.
The CARES Act has been credited with supporting consumption and blunting the damage to small businesses caused by the coronavirus downturn, but key provisions expired around the end of July.
An agreement with struggling US airlines to avoid layoffs in exchange for payroll funding, lapsed at the start of October, and the carriers have announced tens of thousands of job cuts.
Trump threw the stimulus negotiations into chaos last week when he ordered Mnuchin to halt the talks, but quickly backed off and has since been urging big measures.
IMF chief economist Gita Gopinath told AFP on Tuesday that a new stimulus package on the order of $2 trillion could boost US growth next year by two percentage points.