Stocks Index ETFs Roar Back Off Fresh Overnight Lows | ETF Trends

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.

Travel and home goods stocks, which were likely to see the biggest boost from a successful reopening showed significant losses. Carnival and Royal Caribbean cruise lines each lost more than 4%. United Airlines lost 3.7% and American Airlines slid 3.5%. Retailers Kohl’s and Gap declined. The US Global JETS ETF (JETS) is down 1.70% on the day, while the ProShares Online Retail ETF (ONLN), which benefits from online buying is 1.53% higher Monday.

“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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