U.S. stocks ended a volatile session slightly lower as the White House and Democrats neared an aid deal but signaled it’s unlikely to become law before the election. Treasury yields climbed and the dollar retreated.

The S&P 500 Index closed lower after an up-and-down session that saw the index whipsawed by takes on the progress toward a deal. House Speaker Nancy Pelosi continued talks with White House representatives even as the odds remained long for a deal that could pass in the Senate. Small caps lagged behind.

“You look at the trading today and it’s almost like watching a cat with a laser pointer,” Mark Hackett, chief of investment research at Nationwide, said by phone. “Pelosi comes out midday and says she’s excited about the deal, and then two minutes later says she doesn’t think a deal will get done, and the market’s reacting. Investors are fixated on the shiny object, which is the stimulus deal.”

Energy producers were among the worst performers as oil fell toward US$40 a barrel in New York. Social media firms fared better after Snap Inc. reported strong earnings, with Twitter Inc. and Facebook Inc. both up more than 5 per cent at one point. Of the 84 companies in the gauge that have reported earnings this season, only 10 have missed analyst profit forecasts. Tesla Inc. rose ahead of financial results later Wednesday. Netflix Inc. sank the most since March after subscribers fell short of predictions. A surge in copper lifted materials producers.

The U.S. 10-year yield broke above 0.8 per cent to the highest since June and European yields also rose after Democratic House Speaker Nancy Pelosi expressed hope for political compromise on a bill this week. Rates came back from their peak as negotiations dragged on Wednesday.

European stocks slumped for a third day, with gold miners Fresnillo Plc and Centamin Plc falling after cutting production guidance. Telecom equipment maker Ericsson was a bright spot, climbing after a profit beat.

“Markets are pretty aggressively priced and we’re getting a lot information about earnings season,” said George Pearkes, global macro strategist at Bespoke Investment Group. “This is just stocks doing what stocks do, which is sometimes go up and sometimes go down, and whether it’s because of stimulus or something else is kind of irrelevant.”

Pelosi said Tuesday she also hoped that fresh stimulus spending would be retroactive, although the Republican Senate majority leader has warned the White House against a bigger Democrat-led deal before the election. The administration said it hopes to get a deal in the next 48 hours and that its offer is now up to US$1.88 trillion, below the US$2.2 trillion Pelosi has pushed for.

“The rise in yields suggests that the market thinks a stimulus deal will be forthcoming and that the Democrats are set to take both the presidency and the Senate at the Nov. 3 election,” said John Hardy, chief foreign-exchange strategist at Saxo Bank.

Elsewhere, the yen headed for its best day versus the dollar since August. The pound jumped after European Union chief Brexit negotiator Michel Barnier said a deal is within reach. Copper traded near a two-year high on supply disruptions in Chile.

Oil dropped toward US$40 a barrel in New York after an industry report pointed to a surprise increase in American crude stockpiles.

Here are some key events this week:

• Brexit trade talks are likely to continue at least into next week if the U.K. and EU fail to reach an agreement.
• The final presidential debate before the U.S. election, between President Donald Trump and former Vice President Joe Biden, will be live from Nashville, Tennessee on Thursday.
• U.S. jobless claims come Thursday.

Here are some of the main market moves:

Stocks

• The S&P 500 Index fell 0.2 per cent as of 4 p.m. New York time.
• The Nasdaq 100 Index lost 0.1 per cent.
• The Stoxx Europe 600 Index decreased 1.3 per cent.
• The MSCI Asia Pacific Index rose 0.8 per cent.
• The MSCI Emerging Market Index gained 0.4 per cent.

Currencies

• The Bloomberg Dollar Spot Index dipped 0.5 per cent.
• The euro increased 0.3 per cent to US$1.186.
• The British pound surged 1.6 per cent to US$1.3149.
• The Japanese yen strengthened 0.9 per cent to 104.53 per dollar.

Bonds

• The yield on 10-year Treasuries jumped three basis points to 0.81 per cent.
• The yield on two-year Treasuries climbed one basis point to 0.15 per cent.
• Germany’s 10-year yield gained one basis point to -0.59 per cent.
• Britain’s 10-year yield climbed five basis points to 0.242 per cent.

Commodities

• West Texas Intermediate crude fell 4 per cent to US$40.04 a barrel.
• Gold futures strengthened 0.6 per cent to US$1,927.50 an ounce.

--With assistance from Todd White.