Before The Bell - Investors returned from the long Labor Day weekend and did so in a selling mood. On point, after the stock market had sold off on Thursday and Friday of last week, the leading averages went south again yesterday morning, and within minutes after the open, the Dow Jones Industrial Average and the NASDAQ were off by as much as 600 points and 400 points, respectively. The market then would stay notably lower into the lunch hour.
However, the early and mid-afternoon would bring some relief, and the Dow and the NASDAQ would about halve their losses from the morning’s nadir. As had been the case last week, it would be the technology laden NASDAQ that would head up the downturn, as several high-profile names on that composite would be pummeled, none more so than Tesla (TSLA). In all, the electric car maker, which had seen its stock race ahead to $502 a share last week, would see it tumble to a close of $330, off 88 points. The fact that the stock was not added to the S&P 500 after its recent 5-for-1 stock split did not help sentiment.
Meantime, after the key indexes did try to turn around in the early and mid-afternoon, the selling picked up again, and the major indexes would hit session lows as the final hour wound down. In all, the Dow would fall 632 points and the NASDAQ would give back 465 points. In doing so, the latter would fall into correction territory, which is defined as a peak-to-trough setback of 10%, or more. Tesla, meantime, had fallen into a bear market, with its more than 20% aggregate drop in price.
So what is scaring investors? For one thing, there are belated concerns about valuations, especially in the technology space. Then, there are rumblings about a deteriorating economic situation between the United States and China. There also are fears about a worsening of the coronavirus outbreak as schools start, flu season approaches, and the weather gets colder. Finally, there are the unknowns about the November elections. A contentious campaign and electoral process now are seemingly unavoidable.
So where do we go from here? Last evening, the equity futures moved lower suggesting, initially, at least, that more selling could be ahead this morning. Also, disappointing vaccine news hit the Street after the close yesterday, amid concerns that an effective preventative for the COVID-19 might still be months away.
As for the market this morning, after last night's moderate move lower by the Dow and NASDAQ futures, the major indexes are now suggesting that we could see some bargain hunting this morning, as the Dow, S&P 500, and NASDAQ futures are all pointing at early recoveries. – Harvey S. Katz, CFA