Before The Bell - This certainly has been a tumultuous year for Wall Street. On point, after the stock market had raced ahead on Monday on optimism about the President's health and the expected passage of a new stimulus bill in the coming days, investors forged ahead once more yesterday morning. Thus, within the first hour, or so, of trading, the Dow Jones Industrial Average, up 465 points on Monday, would tack on another 200 points yesterday morning.
This latest uptrend then would continue. Indeed, the stock market would strengthen a bit further as we neared the final hour of trading, likely lifted by further indications from the White House that the President was recovering from COVID-19 and that the stimulus talks were progressing. The fact that Federal Reserve Chair Jerome Powell again implied that passage of such a fiscal program was needed seemed to further embolden the bulls.
However, this late enthusiasm for equities would prove short-lived, as the President, pointing to some details and the overall cost of the program favored by the Democratic leadership, abruptly pulled the rug out from the talks, by suggesting that no bill would be passed until after the November 3rd election. Wall Street, which had rallied for much of the past few days on optimism about the stimulus talks, suddenly swooned, with an about face of some 600 points in the Dow in an hour.
When all of the dust had settled, the blue chips would lose 375 points, the S&P 500 would shed 48 points, and the tech-heavy NASDAQ would fall by 178 points. In the late selling, the airlines would be especially hard hit. All told, given the dramatically changing political landscape, with hopes for a fiscal stimulus deal seemingly all but dashed in the short term, and with comments by the Fed Chair taking on added importance, there was little surprise that stocks dropped.
Then, after the close, the futures initially moved lower, with the Dow, the S&P, and the NASDAQ indexes all edging downward in the first hours after yesterday's closing bell. However, after the President said that he would sign a streamlined and less costly stimulus package, the futures rallied nicely. Now, as we approach the new trading day, the late-Tuesday weakness seems to be a fading memory, and the market appears positioned to open the upcoming session solidly to the upside. – Harvey S. Katz, CFA