Stocks sold off from the open and did a really good job of going nowhere all session. Lower start, lower early afternoon low, then a lateral slide to the close near session lows. All indices suffered downside though on lighter volume. Lower volume trade is more of a buyers' strike than dumping stocks, but on the session the result sure felt like a bit of dumping.
SP500 -18.59, -0.86%
NASDAQ -48.26, -0.91%
DJ30 -166.62, -0.91%
SP400 -0.54%
RUTX -1.09%
SOX -0.99%
VOLUME: NYSE -1.7%, NASDAQ -1.7%
A/D: NYSE -2.5:1, NASDAQ -3.1:1
As you would expect from their relative positions to end last week, NASDAQ, SOX and RUTX ended the day on better footing. Not great, but better. DJ30 is the worst, having landed back in the range from 2 weeks back after that sharp Friday selloff.
Some individual stocks sold hard as well. Not just selling back in the pattern but breaking sharply lower. Some financial big names were in that group, e.g. C, BAC. Some recent leaders in leadership groups struggled as well, e.g. BABY, CELG.
Causes? Remember, the FOMC just last week opted to pass on any rate moves because it just wasn't something the chairman wanted to do at this time. The market liked that, at least initially. Friday was no great upside move and we just saw the Monday result.
Some speculated some cold feet ahead of the first presidential debate. Recall Mark Cuban stating that if Trump wins the market collapses. Is the Donald's recent success in the polls playing that hand? Doubt it.
Others cited DB and its woes. Germany's Merkel stated that DB would not get any bailout to which DB responded it hadn't asked for one and didn't need one. After dropping almost 10% Monday alone before rebounding to just a whisker of a loss at -7%, it would appear DB's optimism isn't shared by investors. Indeed, DB's comments are eerily similar to other banks just in front of the financial crisis. Of course what would you expect DB to say, that the bank was going to hell in a hand basket? Its shareholders, but just the pickiest ones of course, might have an issue with that kind of disclosure. It is the case of where there is smoke there is fire, and you can see the smoke swirling out the bank doors.
The financials sold on higher volume while the overall market sold on lower volume. Perhaps a general buyers strike with a blend of some dumping of financial stocks because of DB's woes and others just stepping back to see just what happens in the debate and in general in the post-FOMC market.
That makes some sense, and now that there is a pullback to test the post-FOMC move (and indeed a complete give back of that move for NASDAQ and SOX (RUTX hanging in with some gains), it will be time to see if those 3 indices can provide the kind of leadership needed to rebound from this test of that move and propel further upside.
Have a great evening!
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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