Dow Drops 500 Points, S&P 500 Sees 4-day Losing Streak


Author: Michael Stern

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Monday saw stocks fall as fears over the possible worsening of the current COVID-19 virus. The market also reacted to the uncertainty of a future fiscal stimulus.

The Dow Jones Industrial Average fell by 1.8 percent to close 509.72 points lower at 27, 147.70. The S&P 500 did not fare any better. It lost 1.2% to close at 3,281.06. The Nasdaq Composite did considerably better. It closed just 0.1 percent down on the day, after a late surge in tech stocks. At one point during the session, the Dow was down over 900 points, and the S&P 500 was down around 2.7 percent.

The decline witnessed Monday is the first since February that the S&P 500 posted four straight losses. The Dow had the worst day it has seen since early September when it fell by 2.3 percent.

It has been a downbeat month so far for Wall Street. In September, the Dow is down 4.5 percent, and the S&P 500 is down 6 percent. Although the Nasdaq Composite was down only slightly on Monday, its loss, month to date, is 8.5 percent.

Another Wave of COVID-19

There are genuine concerns over another wave of coronavirus cases. To halt an increase in infections, the United Kingdom is considering another national lockdown. Scientists in the U.K. are of one voice, saying the infection rate could reach 50,000 every day if action is not taken. The FTSE 100, the countries benchmark, fell by 3 percent on the fear of a resurgence of infections.

In the United States, stocks that would feel the impact of another lockdown also declined. Carnival Corp. shares were down almost 7 percent, Southwest and Delta Airlines fell nearly 6 percent and over 9 percent, respectively.

Brad Kinelaar, Global Portfolio Manager at Barrow Hanley, said this is a health-care issue, one which we have made little progress on. Mr. Kinelaar went on to say, “we do not have a vaccine, there is no cure, and the country is still trying to determine how best to deal with the crisis.”

The Impact of Justice Ginsburg’s Death

The death of Supreme Court Justice Ginsburg has made negotiations for a coronavirus stimulus bill even more complicated. Her death may very well lead to a difficult time ahead of the November Presidential election. President Trump has stated that he will nominate a replacement for Justice Ginsburg before the week is out. Republicans, as well as Democrats, have been stalemated since July after the previous stimulus bill expired.

Chris Kruger, strategist at Cowen, does not believe a new stimulus bill will be passed under after the November 3rd presidential election as the fight over the empty seat left by Ginsberg’s death consumes lawmakers.

Stocks are Down

After a report found that several global banks were involved in moving illicit funds, bank stocks also are down, contributing to the broader drop in the market. Deutsche Bank stock fell by 8.5 percent on the news, while JPMorgan Chase stock fell over three percent.

Meanwhile, escalating tensions between the United States and China have caused the Ministry of Commerce in China to release provisions stated in what is being called “The unrealizable entry list.” The statement was released one day after the U.S. announced a ban on TikTok as well as WeChat.

The departure of Nikola founder Trevor Milton caused G.M. stock to fall almost 5 percent. Nikola shares fell by 19.3 percent on Monday.

September has not been kind to technology stocks. Although Microsoft, Netflix, Apple, and Amazon all eked a small gain, all are down sharply for the month.

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Michael Stern is a calculated risk taker with deep technical insight into digital currency and the development of strategic strategies.