Have you ever been at a picnic, and there’s a bee buzzing, and you ignore it because it’s just one bee? And then another bee joins it, but you ignore the pair of them because, really, it’s just two bees? And you repeat that, until there are four or five bees buzzing around, and you’re trying to act all calm and collected, but then the bees buzz ever closer, and you just can’t take it anymore, so you start waving your arms, and freaking out, and then get stung by a bee? That’s what happened to the stock market on Monday.
Not much changed since Friday (yes, that’s a column I already regret writing). Covid-19 cases are still spiking. Stimulus continues to appear dead in the water. And the election is still being contested on Nov. 3. But investors woke up Monday morning and apparently decided that something had changed—and they started selling.
Dow Jones Industrial Average
slumped 650.19, or 2.3%, while the
index fell 1.9% and the
declined 1.6% It was ugly, though uglier for some more than others, and volume
What’s shocking about the drop isn’t the drop itself—one could argue that it was due—but that the market decided it was time to drop now on information we’ve had for weeks now. So what happened? My best guess: Investors realized that the election was next Tuesday, and that felt a little too close for comfort. “There’s no material news,” says Peter Andersen of Andersen Capital Management. “Look how many days to the election. That’s the main driver.”
It’s not that the others aren’t important. The market wants stimulus—bad—and isn’t going to get it. The continued outbreak of Covid-19 is also worrisome, though it doesn’t look like it’s had much of an economic impact…yet. “Rising COVID-19 cases here in the United States and also globally has investors on their heels—precisely when they were aiming to move past the panic stage of this pandemic,” says Peter Kenny, independent equity strategist at Kenny & Co, who also cited the election as a worry.
So, a big drop. One that was exacerbated by European tech giant
earnings—earnings that were so bad its ADRs fell 23% and contributed to the weakness in some U.S. tech stocks. Those tech stocks—including
(FB), along with
(AAPL), which rose 0.01% Monday—will be reporting earnings over the next there days, and how their stocks respond could determine whether the current selloff has legs. The election, however, may be a problem there, too. “The earnings bonanza could even increase volatility on the Street, especially given the lower-than-average liquidity due to next week’s elections,” writes Gorilla Trades strategist Ken Berman.
Write to Ben Levisohn at Ben.Levisohn@barrons.com