The markets continued their downward spiral Monday, as traders headed back to work for the first trading session after Labor Day break. Tech stocks felt the brunt of the hit amid signs of significant volatility.
The Nasdaq Composite ended the session down more than 4%, after sliding 6% in the two days ahead of the holiday weekend. The Dow closed down 2.25%, losing 632 points to close at 27,500 and the S&P was off nearly 2.8%, or 95 points, ending the session at 3331.84
Some of the names hardest hit include shares of electric car maker, Tesla, which ended the session off a whopping 21%, as investors come to grips with the news that the stock will not be part of the S&P 500 index.
Apple traded down almost 7% ending the session at $112.82 a share. Facebook lost more than 4% and, the live video-services company Zoom…made famous thanks to the new coronavirus work-from-home culture…closed down more than 5%. Amazon, which also has also seen a massive run-up in its stock, ended down more than 4% in today’s session.
Traders are primarily focused on November’s presidential election. Fears of a Constitutional Crisis are becoming mainstream amid commentary from the left that Biden should not concede, no matter what… as well as concerns from the right that the election could be manipulated with mail-in votes.
Either way you slice it, the likelihood of a peaceful transition of power is becoming less clear…and, political chaos threatens to take its toll on the markets.
As such, the expectation is for even greater volatility in the stock market as we head toward election day. The VIX index, a measurement of fear and volatility in the markets traded up better than 3% today, at nearly 32, indicating investors’ concerns.
Also within traders’ view…China. President Trump indicated his willingness to “decouple” from China on Monday–a concept that makes investors nervous about the short-term valuations of companies. As a result of our increasing reliance on the Chinese as both a marketplace for U.S. goods, as well as a producers of cheap products for the U.S., a decoupling event would have near-term consequences.
Nonetheless, despite today’s downside, investors should take heart in the underlying fundamentals of our current economy. While we have seen a tremendous run-up in the inflation of equity prices (I’d argue, at the expense of the real economy thanks to overly aggressive Fed policy…) the economy itself remains surprisingly resilient and strong given the effects of the coronavirus shutdown. The jobs market is improving, as Friday’s unemployment report indicated with 1.4 million jobs being added to our economy in the month of August, bringing the unemployment rate down to 8.4% from 10.2% in July. Meanwhile, for better or for worse, the Federal Reserve has indicated its willingness to keep rates low indefinitely…as it seeks greater inflation in our economy.
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