Before The Bell - After the major equity averages had fallen by more than a third from late February to the final week of March in a frantic meltdown brought about by the raging coronavirus, prices steadied and then recouped about half of their losses. For example, the Dow Jones Industrial Average would tumble from nearly 30,000 to a little over 18,000. Then, that index would jump more than 6,000 points in a veritable buying panic. Things continued along this recovery path until this week.
Then, after a mixed performance on Monday in which the Dow fell, but the NASDAQ continued to gain ground, equities put in a much more uniform showing the past two days, with the sellers in the lead. On point, the Dow would fall by 457 points on Tuesday and by another 517 points yesterday, bringing the two-day decline to almost 1,000 points. The apparent impetus for this one-two punch was back-to-back testimony from a pair of notably different authorities, infectious disease expert Anthony Fauci and Federal Reserve Chair Jerome Powell.
Essentially, Dr. Fauci opined that if we opened up the country too quickly, a resurgence of COVID-19 could quickly follow. He also suggested that a vaccine might well be a ways off, if one is discovered altogether. That was the lead story on Tuesday. Then, yesterday, stocks tumbled again, with the Dow dropping the aforementioned 517 points, after having been down almost 700 points shortly before the close. As to Mr. Powell, he suggested that more needed to be done to sustain the economy.
Not only did the Fed Chair's comments unnerve traders, but noted investor David Tepper called this stock market the second-most overvalued he's ever seen. As to individual stocks, Dow components Raytheon Technologies (RTX) and American Express (AXP) led the blue chips lower. From a group standpoint, notable losers were energy and financial stocks. Here, Wells Fargo (WFC) stock hit the skids along with other banking behemoths. At the close, the Dow, as noted, was off 517 points and the NASDAQ had shed139 points.
Meanwhile, after yesterday's market valuation and economic concerns and the prior session's disease worries, the equity futures moved somewhat higher in the hours immediately after the close, as Wall Street tried to put the brakes on this two-day setback. Traders clearly are hoping that this has been a brief interlude in a strong seven-week market comeback. As to the day ahead, after that buying flurry last evening, the equity futures now are pointing to a lower opening when trading resumes shortly. – Harvey S. Katz, CFA