(Reuters) – Wall Street’s indexes tumbled on Monday, with the S&P 500 on track for its worst day in more than a month, as soaring coronavirus cases and a deadlock in Washington over a fiscal aid bill darkened the economic outlook eight days before the Nov. 3 presidential election.
* STOCKS: Dow down 2.76%, S&P 500 down 2.31%, Nasdaq down 2.22%
* BONDS: Benchmark 10-year notes last rose 13/32 in price to yield 0.7977%, from 0.841% late on Friday.
* FOREX: The dollar index rose 0.255%, with the euro down 0.37% to $1.1815. [FRX/]
* VIX: The VIX was up 17% at 32.22
ROBERT PHIPPS, DIRECTOR, PER STIRLING CAPITAL MANAGEMENT, AUSTIN, TEXAS
“We are seeing an explosion in COVID cases. It is starting to move higher in a parabolic move. Not helping things is that the (White House) chief of staff came out and said we are not going to be able to get control of COVID. That’s not positive for the market. Any hope of fiscal stimulus is now off the table. The market is also concerned about a contested election. When we got into October, there was a lot of hope that we’d get fiscal stimulus…Now that that case for a potential rally is gone, we’re back to worrying about the likelihood of a contested election. The betting markets and the polls are both getting closer.”“If we do get a Biden presidency, there is potential for an increase in capital gains taxes. Maybe we’re seeing some signs of people locking in capital gains this year at a lower rate. But the major factors are an increase of COVID cases and the removal of any real possibility for stimulus, along with the growing probability of a contested election.”“When there’s a buyer strike, and there are many reasons to sell, you do hit an air pocket…What we’re seeing today is people setting up for Election Night: raising cash to preserve capital, lock in capital gains at a lower rate, and to have some cash available for the growing eventuality of lower prices.”
RANDY FREDERICK, VICE PRESIDENT OF TRADING AND DERIVATIVES, CHARLES SCHWAB, AUSTIN, TEXAS
“It’s fairly connected to the fact that virus cases are rising not just in the U.S. but globally, and it doesn’t seem that we’re going to get a stimulus package. Every day the market ebbs and flows based on stimulus, but the virus has grown so fast that it’s overshadowed that to some extent.”
“It’s hard to say what put us over the edge. We had a great rebound from the mid-September lows, but that came to an end on October 12. The past week-and-a-half has not been a particularly good time…It’s not a critical huge move: 2% these days with the VIX above 30, that’s close to normal. It’s forecasting 55-, 56-point moves per day. We’re at 78 points – that’s not that far out of the expected range.”
QUINCY KROSBY, CHIEF MARKET STRATEGIST, PRUDENTIAL FINANCIAL, NEW JERSEY
“You had disappointing COVID numbers in Europe. You had SAP in Germany warning about future sales given the pandemic… and COVID numbers in the U.S. are climbing.
“In addition you had again this tug of war between Democrats and Republicans on stimulus that increasingly appears to be overtly political on both sides.
“Overall, it is the concern about the economic recovery, and anything that jeopardizes that is going to affect the market.”
KING LIP, CHIEF STRATEGIST, BAKER AVENUE ASSET MANAGEMENT, SAN FRANCISCO
“I think there’s a couple of factors (behind the market’s fall). No. 1, the polls appear to be narrowing, among some polls, and what that causes is just more uncertainty. Historically what we have seen is that close elections tend to have more volatility going into Election Day. So I do think that’s a factor. Anecdotally, I can tell you that from our clients’ perspective, the uncertainty is causing them to stay on the sidelines. So you’re seeing a lack of buyers, generally speaking.”
“No. 2, the stimulus delay,” adding that the potential of stimulus to come to fruition before Election Day, looks like the probably of that is pretty low.”
CHRISTOPHER GRISANTI, CHIEF EQUITY STRATEGIST, MAI CAPITAL MANAGEMENT, CLEVELAND, OHIO
“It’s almost entirely COVID related. We thought all along that the most important factor for the market, good or bad, is COVID and it’s bad (today) because cases are rising. We think in several weeks or months it will be good with the arrival of a vaccine.”
“It should move the market because it directly affects the economic health of the United States in earnings of so many companies.”
“People are nervous about the expansion in cases. The administration has come out and said it does not want to slow down the economy yet as cases rise they may not have a choice. So the administration is in a difficult position.
“Having said that they will return to the stimulus as we get closer to the election in one week. I wouldn’t be surprised if the administration tries to get a stimulus package fast for a good headline against the bad COVID headline.”
ROBERT PAVLIK, SENIOR PORTFOLIO MANAGER, DAKOTA WEALTH, FAIRFIELD, CONNECTICUT
“It started off with concerns about coronavirus increasing as well as the election, but once the S&P 500 broke the 50-day moving average, we saw a precipitous drop. There’s really nothing in economic or earnings news.”
“The stimulus and election added to this morning’s weakness but, I think a lot of people are keyed into the technicals.”
TIM GHRISKEY, CHIEF INVESTMENT STRATEGIST, INVERNESS COUNSEL, NEW YORK
“It has to do with the lack of a stimulus package and concerns about the pending election. There’s nervousness on both those issues.”
“It’s a broad sell-off, it seems to bit a global decline because Europe was also shaky and we’re seeing the virus spread throughout Europe and shutdowns happening there.”
“The concern here is given the second wave of the virus, we could see shutdowns. It comes back to this second wave of the virus which his spreading rapidly in the U.S. We’re at an all-time high for daily infections. The fear is if this continues there will be restrictions in terms of commerce and movement. We may go back to the things were in April and May.”
JIM BARNES, DIRECTOR OF FIXED INCOME, BRYN MAWR TRUST, BERWYN, PENN
“The potential for a big financial package has been a big driver over the past couple of weeks in regards to what the market can expect.”
“At this point it has been put to the sidelines, at least in the short-term, and the market has been having a hard time looking beyond the short-term disagreements that have been occurring. There had been a lot of optimism that had been priced in, on the likelihood of a deal emerging. But it’s not as fluid as the market had hoped.”
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