On Monday stocks are attempting a strong rally off fresh overnight lows from Sunday, that took markets down to levels not seen since last month, as investors reconcile the expanding threat of a second coronavirus wave, as civil rights protests continue.
The Dow Jones Industrial Average plummeted nearly 4% from Friday’s close in futures markets before sprinting back to down just 0.5%. The S&P 500 also dropped roughly 100 points or more than 3% from Friday before surging back to less than 0.25% down. The Nasdaq Composite sank as well, but is currently positive on the day, up 0.33% as of 1245pm EST.
Stock index ETFs are trading in line with the underlying benchmarks. The SPDR Dow Jones Industrial Average ETF (DIA), SPDR S&P 500 ETF Trust (SPY), and Invesco QQQ Trust (QQQ) are tracking stock indexes as well, but are still showing losses on the day.
“We’re in the midst of a correction,” said Peter Cardillo, chief market economist at Spartan Capital Securities. “The coronavirus is spiking up again and that’s a problem. There was also over-exuberance in the market. The market was discounting a quicker economic rebound.”
The action Monday followed a sizable pullback last week, triggered by renewed panic over a resurgence in the coronavirus, which now shows more than 2 million cases and nearly 150,000 deaths in the United States alone, disappointing support and comments from the Federal Reserve regarding the economic outlook and recovery process, and profit-taking by investors following the massive rally.
The Dow and S&P 500 slumped 5.5% and 4.7% last week, respectively, while the Nasdaq sloughed off 2.3%. All three major equity benchmarks saw their worst week since March 20.
Individual states are also seeing a rapid rise in the number of Covid-19 cases now that the reopening process has commenced.
“The meetup may need to take a break, as sentiment has turned too bullish too rapidly,” Ed Yardeni, president and chief investment strategist at Yardeni Research, said in a note on Sunday. “Now that reopening is happening, there’s a fear of suboptimal results: less social distancing triggering a second wave of the virus, followed by another round of lockdowns.”
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