The S&P 500 suffered its worst day of selling since it hit a multi-year low on March 22 and 23. The major indexes are up sharply since then and convinced many market players that a "V"-shaped recovery was on the way due to the power of massive economic stimulus. But we saw some doubt Tuesday about the simplicity of the advice, "don't fight the Fed."
We will see if selling momentum picks up now that the sharp bounce has cooled. There is not much technical support on the charts, but it will most likely be the response to earnings reports that determine overall market sentiment.
Netflix (NFLX) reported after the close and, as expected, it raised its guidance quite a bit. The stock has been on a run and the big immediate move on the news is being sold, although the stock is still up on the news.
Texas Instruments (TXN) reported ahead of expectations, but provided a wide range for guidance and limited clarity. The stock is up on the report, but has only recouped a small amount of the day's losses.
So far in this earnings season, the reactions have been more puzzlement than anything else. There is still too much uncertainty about what lies ahead and little reason to rush in and buy.
The key now is to watch to see if the indexes can find some support as the battle over reopening the economy continues to build. There seems to be less optimism about a quick economic recovery, but there are still many folks who are hopeful that the Fed is going to prevent much more downside.
The chaos in the oil market added to the issues, but it illustrates a concern that will linger as far as economic demand. This will develop further as earnings season progresses.
Have a good evening. I'll see you tomorrow.