Stocks started the day on an upbeat note following a couple strong reports from Intel (INTC) and Atlassian (TEAM) , but what was most notable were the concerns about the coronavirus in China was not having any impact. Despite an increase in the number of cases and some blaring headlines, U.S. markets didn't seem to care.
That didn't last for long as news hit of a case in the Chicago area and a possible third case in the U.S. The Center for Disease Control is said to be looking at 60 potential cases in the U.S.
That news spooked the market and triggered a brisk round of profit-taking. Sectors including small caps, banks and biotechnology are particularly weak while technology - due to Intel - is holding relatively well.
Breadth has deteriorated to around 3000 gainers to 4300 decliners but over 550 stocks hit new 12-month highs. Apple (AAPL) , Alphabet (GOOGL) and Facebook (FB) had target increases today but only Apple has been able to stay positive. Apple continues to extend into new high territory and is offsetting a large amount of the selling elsewhere.
What has been particularly interesting lately is how much of the discussion about the market is focused on the dynamics that are driving the action. Few market participants believe that it is as simple as good earnings and cheap valuations. The driving forces have little to do with the merits of stocks and much more to do with other issues like liquidity, performance against benchmarks and game theory.
The selling right now is about as intense as it has been all week and there may be some inclination to stand aside in case of negative headlines about the coronavirus over the weekend.
Many market players - including me - would be relieved to see a decent bout of selling. The lack of ebb and flow is not healthy and it will be refreshing to restore some doubts about the market's ability to go up forever. I am not doing any buying right now but will be watching for small caps to set up into earnings reports in the next few weeks.