US stocks sold off all day, from the opening to the closing bell, and the selloff just gathered pace during the trading session.
Energy, industrials and financials stocks are the among the worst performers of the day. Those sectors that are more sensitive to the economy and the pace of the recovery felt more pain Monday, said said Eric Freedman, CIO at US Bank. But there were losses across all sectors.
What’s the deal with this selloff?
While earnings will inject volatility in the tech sector, “on a more macro level, ongoing US stalemate over US fiscal stimulus and the rapidly spreading Covid-19 is going to determine the direction for the wider markets,” said Fawad Razaqzada, market analyst at Think Markets, in a note.
The ever-slimming chance of a new stimulus package before next week’s election isn’t a new factor for the market. And yet it has been a big driver of the action over the past weeks, even as nothing has really changed as a result of recent negotiations.
So what changed?
“I think the big difference this time around [is]…there’s been a tremendous amount of hope baked into the market for quite a while, and we saw some things over this weekend that hit those assumptions hard,” Brad McMillan, CIO of Commonwealth Financial Network, told CNN Business.
Absent economic stimulus, the US recession could “double dip” — a second wave of uncertainty and strife as coronavirus cases soar and businesses are forced to shut their doors. The prospects of having to lock down again are scary for economists and investors alike.
How we got here
It’s been a roller coaster year for stocks. The three major indexes have rallied back — helped by hopes over government spending — after an ugly September, when tech stocks led a plunge nearly into correction territory.
The S&P is still about 5% above its late-September low, for example, even with Monday’s selloff.
McMillan said Monday’s downturn isn’t investors selling out of sheer panic, but rather a healthy repricing that more accurately reflects the state of the many situations afoot.
“There’s still a fair bit of cushion in prices even after today’s selloff,” he added.