Commenting on the Dow dipping in bear market territory and today’s trading Gorilla Trades strategist Ken Berman said:
Q4 2019 hedge fund letters, conferences and more
While today’s selloff was scary, the major indices closed right at Monday’s lows, and that gives hope to bulls that another technical breakdown might still be avoided. While small-caps lead the way lower and breadth was awful on Wall Street, long-dated Treasury yields edged higher while gold also fell today, meaning that safe-haven flows were weaker than on Monday, and that could support equities later on this week.
The major indices all suffered steep losses today, essentially giving back yesterday’s lofty gains, with the Dow Jones Industrial Average (INDEXDJX:.DJI) closing the day in bear market territory due to intensifying coronavirus-related fears. The Dow was down 1,467, or 5.9%, to 23,551, the Nasdaq (INDEXNASDAQ:.IXIC) lost 392, or 4.7%, to 7,952, while the S&P 500 (indexsp:.inx) fell by 141, or 4.9%, to 2,741. Decliners outnumbered advancing issues by a more than 40-to-1 ratio on the NYSE, where volume was well above average again.
The Dow registered its quickest 20% drawdown in history in the wake of today’s plunge, dipping into bear market territory quicker than even in 1987 following the infamous Black Monday. The energy sector, industrials, and financials were all weaker than the broader market, weighing heavily on the industrial average, but tech stocks and the Nasdaq fared slightly better, which was a small plus for bulls amid the carnage. The Russell 2000, on the other hand, hit its lowest level since late-2018, as the deteriorating economic outlook and the prospect of further rate cuts by the Fed continues to hurt small-caps.
While a lot of experts were already certain of it, risk assets still took a nosedive after the World Health Organization (WHO) officially declared a global pandemic. With the number of confirmed cases sill rapidly rising across the globe and more and more regions being under lockdown in Europe, the severity of the pandemic’s economic impact is still hard to predict. Treasury Secretary Mnuchin told the press that the first part to highly-anticipated stimulus package will be ready in a matter of days, and that could give a boost to equities ahead of the weekend break.
Biden's Step Towards Securing Democratic Presidential Nomination
Joe Biden took a huge step towards securing the Democratic presidential nomination, with his strong showing on yesterday's primaries, making a comeback for Senator Bernie Sanders all but impossible. The Senator decided not to exit the race just yet, but analysts widely expect him to do so following Sunday’s debate. According to the largest prediction markets, Mr. Biden’s chances to take the White House in November have also risen due to the effects of the virus, so the campaign will likely heat up in the coming weeks.
Following today’s Consumer Price Index (CPI), which was slightly higher-than-expected, the Producer Price Index (PPI) will be in focus tomorrow. Prices are expected to edge lower, reflecting the weakening global demand, but the core PPI is forecast to rise by 0.1% after surging higher by 0.5% last month. The weekly number of new jobless claims will also be out, and another relatively low reading could give a confidence boost to investors in the face of the rising odds of a global recession. The European Central Bank (ECB) will hold its monetary meeting in during the pre-market session and after the Bank of England’s rate cut today, the ECB is also expected to announce monetary easing. Will we fall further into bear market territory or make a rebound? Stay tuned!
