It was looking like a day of rest after a big gain on Monday, but news calling into question the Moderna (MRNA) coronavirus vaccine data triggered a blast of late selling. There isn't any hard data in the public domain to analyze, and that caused some vaccine experts to question the results.
In addition to the vaccine issue, Boston Fed member, Eric Rosengren discussed the view that the unemployment rate could still be double-digits at the end of the year. The market has been remarkably sanguine about poor economic news, but it can still produce a reaction when it is released near the close of the day.
After the big gain Monday, the giveback Tuesday was mild. But what was more significant was the rotational action. The value names that led the day before lagged, while the "new economy" growth names were the leaders. The bulls have been hoping that value names would start to perform as they would indicate a major change in market sentiments, but groups like banks still look like they could retest the March lows.
My contention is that we would see trading range action in the near term. The breakout move Monday is not typical trading range behavior, but the reversal Tuesday was what we'd expect in a trading range. The potential for more downside from here is fairly high, but the good news is that it continues to be a market for stock picking. The action has not been highly correlated and there is a good supply of winners and losers.
Although some market pundits would disagree, this is still mostly a bear market, although there is a bull market in "new economy" stocks. The S&P 500 has not made much progress since mid-April and this is likely to continue to be the case. That is good for traders, but will be a challenge for longer-term investors who will have to be very patient.
Have a good evening. I'll see you tomorrow.