After some dull action Monday, the market is offering quite a bit more drama today. We started off with a routine move higher on comments about progress on China trade but that move was index-driven and individual stocks acted poorly. There were signs of rotation action under the surface and small-caps were underperforming.
The action under the hood was causing concern among traders and the selling picked up as Trump spoke before the United Nations.
It looked like the indices were trying to find support but then headlines hit that Nancy Pelosi is holding meetings and will make a decision on starting impeachment proceedings against President Trump.
Stocks sold off on that news reflexively as it causes a higher level of uncertainty, but the main reason we are seeing a negative reaction is that the market has been looking for an excuse to sell off and this is a good one. No other news has been able to drive the indices out of a tight trading range but this story hit at exactly the right time for a negative response.
It is not the news that drives the market but the market setup that drives the news. In this case, the market needed a good reason to correct and the impeachment news is doing it. If the technical setup was different the news may not have produced any result.
The political calculus of this move will be interesting and there will be some market impact as it develops further but overall it is probably good that it is hitting now so that we can get the correction that is needed and then move on.