To paraphrase the late Howard Cosell: "Down goes Wall Street! Down goes Wall Street!"
The stock market on Monday experienced its biggest one day loss in history as the Dow hit the 13%-down Level Two circuit breaker, which stopped market trading for the second time in the day with the Dow down 2,997.10 (12.93%), the S+P 500 down 324.89 (11.98%), the Nasdaq down 970.28 (12.32%) and the Russell 2000 off 172.72 (14.27%), in a day of calamitous on again, off again trading. Still, the market closed 100 points higher than its low for the day, peanuts in today’s vernacular.
Going into the last half hour of trading, it appeared the market had stabilized after it opened down low enough to trigger the Level One circuit breaker almost immediately. But once our fearless leader came out and, finally accepting reality, pointed out that the effects from this pandemic could last through August, the market tanked once again. In the last 30 minutes of trading, pure panic set in as it appeared that everyone, including institutions, pension funds, mutual funds, and individual investors alike were trying to raise cash, no matter what securities they had to dump.
Oil dropped too, losing almost 29%, and even sank below $30 a barrel. Investors left pretty much no financial assets unscathed as gold, normally considered a safe haven, slumped as everyone fled almost all risk assets for cash. Treasuries rose, which sent yields lower, but at least they’re still offering positive interest rates unlike back in 2008 when short term Treasuries sold with negative yields. At that time, investors were happy to gobble up safe Treasuries knowing how much they’d lose with the negative yields, rather than taking their chance in anything else which offered unknown losses.
All 30 Dow stocks lost ground, with the best performer, Walgreens Boots Alliance, down just 2.4%. In the Nasdaq, of the 100 largest capitalized issues, only American Airlines finished higher, up 1.48, or 10.34%.
With all traders and investors alike now digesting revised earnings estimates, all appear to at least now be trading on real news. This should lead to continued cautious trading, and any short term rebound in the next few days should, at this point, be looked at as a “dead cat bounce”.
(Aside from being a nationally-ranked Juniors Tennis Player, Wharton School graduate Neal Abrams was a licensed investment advisor for more than 35 years. With Nadal, Djokovic, Serena and Coco on COVID-19 hiatus, he's going to look at the markets instead of the rackets).