TodayMarkets appear steady on this first day of Fall. Technically the fall equinox will occur just as the markets open at 9:30am EST. Futures are flat to begin the day, while Europe is slightly positive. There are signs that the current market correction still has room to run as yesterday’s sell-off was led not by technology, but by the more cyclical sectors. In the U.S. Industrials (-3.4%) and Materials (-3.4%) fell the most, with technology managing to climb throughout the day to into positive territory. It was the only sector to do so. At its lowest point yesterday the S&P 500 entered official correction territory falling 10% from the high set on September 2
nd. Making this the largest pullback the market has experienced since the bottom in March. However, the late day rally shielded larger losses and futures have fluctuated between positive and negative territory overnight, while European equities have remined in positive territory.
Since September we have been led lower by the mega cap technology stocks with the NASDAQ down 9.7%, the S&P 500 down 7% and Russell 2000 only off 5.9%. The S&P TSX has held in a bit better down only 4% in Canadian dollar terms. If markets continue to trend lower our expectation would be for the “catch down” from those FANG+ will continue, leading the overall market lower. We recently trimmed market cap weighted, hedged, US equities in favor of an equal weight approach and removed the hedge.
The U.S. dollar strength coupled with strong demand for bonds indicate that there is something more to be said surrounding the current market malaise than simply an over extended tech sector. For now, however, the equity market pain hasn’t caused credit spreads to blow out. Concerns over a second wave in Europe continue to mount with Boris Johnson telling Britons to work from home when possible and ordered pubs and restaurants to close The U.S. also appears to be entering a third wave with a bottom in the 7-day average of new cases.
The U.S. dollar index has broken above its falling 50-day moving average. Clearly, the markets recent slip has a firm grip on the currency markets, reversing the trends that have been in place for months. A move higher for the dollar would likely signal a risk off environment and be negative for stocks. Fed Chair Jay Powell will be kicking off a three-day testimony before Congress. Along with Steve Mnuchin they will face questions from a House committee over the government’s response to the coronavirus-induced recession.
Tesla’s battery day event is today, the Verge
covers what you can expect including speculation of a million mile battery. One recent tweet gives a hint of what’s to come
“This affects long-term production, especially Semi, Cybertruck & Roadster, but what we announce will not reach serious high-volume production until 2022.”Apple CEO Tim Cook says he is impressed by how well employees have been able to adapt to
working from home. He believes several of them will be able to continue to work from home after the pandemic ends.
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