Commenting on the likelyhood of a pre-election stimulus deal and today’s trading, Gorilla Trades strategist Ken Berman said:
Q3 2020 hedge fund letters, conferences and more
Pre-Election Stimulus Deal Is Now Impossible
The major indices are all trading significantly lower at midday following a gloomy overnight session and a steep morning selloff on Wall Street. The global COVID situation further deteriorated over the weekend and the number of U.S. infections also hit a new record, jumping above 80,000 two days in a row. Even the weekly-average of new cases hit a new high, with the Midwest being the epicenter of the outbreak. The fact that a pre-election stimulus deal is now all but impossible also added to the bearish pressures this morning, even as the high-level talks are set to continue this afternoon.
In economic news, new home sales declined unexpectedly to an annualized 959,000 units following four months of increasing sales, but the current reading is still the second-highest since mid-2007. The German IFO Business Sentiment Index missed expectations in pre-market trading, which has been weighing on global risk assets as well. The large-cap benchmarks all dropped back to their 50-day moving averages, with the Dow plunging clearly below its short-term indicator, so the coming days will be crucial from a technical perspective.
Market Wrap
Dow: 27,659, - 677 or 2.4%
S&P 500: 3,395 - 71 or 2.1%
Nasdaq: 11,369, - 180 or 1.6%
Russell 2000: 1,604, - 37 or 2.3%
Market breadth has been relatively weak this morning, with decliners outnumbering advancing issues by an almost 9-to-1 ratio on the NYSE at midday. 31 stocks hit new 52-week lows on the NYSE and the Nasdaq, while 27 stocks hit new 52-week highs. The major indices have been trading below their daily VWAPs (Volume-Weighted Average Price) for most of the morning session, pointing to intraday selling pressure. The key sectors are all trading deep in the red at midday, but consumer-related stocks and the “risk-off” healthcare and utilities have been showing relative strength, while cyclical issues and tech stocks fared worse-than-average, confirming the broad bearish shift. Stay tuned!
