Before The Bell
- The stock market, which has been on a bullish tear for the past three months, after ending its painful slide on March 23rd, suddenly hit a brick wall yesterday morning. Indeed, after having risen with nary a hiccup over that span, including on Monday and Tuesday of this week, the indexes plummeted yesterday morning with the Dow Jones Industrial Average tumbling by more than 800 points as the noon hour arrived on the East Coast. As has been the case all along, it was a trade-off between reopening gains and the rise in COVID-19 Infections.
Specifically, the Street has been balancing the good news of the steady drum of reopening activity, which recently picked up, and a plateauing in new COVID-19 cases. This combination had led to a jump in retail spending and new home sales. Now, worries about whether the earlier descent in COVID-19 cases can be restored are gripping the Street. Until this week, the optimists appeared to be winning. Now, however, there is a big spike in cases, with half the states posting increases in daily infections--some up to record levels.
Until yesterday, though, there had been a tendency to overlook some of these increases by Wall Street, or at least to de-emphasize them, as stocks continued to surge. Yesterday, however, brought on the aforementioned early session selling, pointing up just how vulnerable we still are. The selling also reflected fears that state governments will be forced to shut down their economies once again, thereby reducing the odds of a big second-half comeback by the economy.
In addition to the latest COVID-19 concerns, investors also were fearful of a possible resurfacing of trade tensions between the United States and Europe, as our country has been weighing new tariffs on exports from France, Germany, Spain, and the U.K., according to reports. Meanwhile, after dropping about 860 points around noon, the Dow rebounded some in the early afternoon, nicely paring its large deficit for a time. Among the day's casualties were the big technology companies, many of which had been leading the recent charge.
In the meantime, the stock market stayed lower throughout the afternoon, ultimately ending the middle session of the week much closer to the day's lows than not, with the Dow closing off by 710 points, the S&P 500 ending down by 81 points, and the NASDAQ suffering a 222-point loss. By far the biggest session casualty among the key index, however, was the Russell 2000, with that small-cap composite receding by 50 points, or better than 3%. In addition to the foregoing concerns, the IMF slashed its 2020 growth forecasts.
Looking out to a new day now, and after some choppy early trading in the U.S. equity futures last evening, the key indexes now are pointing to a somewhat underwhelming start when trading resumes later this morning. – Harvey S. Katz, CFA