Back in January and February, the market was moving along quite well and hit new all-time highs as the Covid crisis raged in China. Many market players were puzzled by why there was no reaction in the U.S., but they just shrugged and continued to stay long.
Then, suddenly, on Monday, Feb. 24, it mattered. The market collapsed and went into freefall and didn't bottom until March 23.
There are some parallels to the current market action, but also some major differences. The market has not been too concerned about the recent growth in Covid cases in Europe and the U.S., but it mattered today when both France and Germany announced economic lockdowns. European indexes dropped sharply and U.S. stocks took a hard hit.
One of the complications? This is occurring at the same time we are dealing with tremendous uncertainty due to the election on Tuesday. The likelihood of controversy is quite high and many folks are concerned that there may not be a clear, immediate winner.
The politics surrounding the election has put the highly anticipated fiscal stimulus on hold and it is not at all clear when that may finally be accomplished.
One of the big differences at this point is that fear of the Covid virus is not as great as it was back in late February. We know much more, treatment has improved, mortality rates are lower, and a vaccine is likely coming. There are some major questions about the wisdom of lockdowns in the U.S., but they could be put in place if hospital ICUs see too much pressure.
While breadth was horrendous Wednesday at around eight-to-one negative, there were some intraday bounces and pockets of relative strength. A selling spree at the close hurt technology names, but support was better in more places than I thought. Some of the worst action I saw was in cannabis and precious metals.
Thursday we have the gross domestic product number in the morning, which will be very big as the economy rebounds. We also have a slew of major earnings reports that night, including Amazon (AMZN) , Apple (AAPL) , Alphabet (GOOGL) , and Facebook (FB) .
It will be particularly interesting to see how those stocks handle earnings as we head into the uncertainty of the election.
Have a good evening. I'll see you tomorrow.