Sept. 21, 2020 - From a high level, Monday's losing session may seem not that different from Friday's.
Dig in though, and you'll see a very different set of circumstances. Unlike action of the last several weeks, technology wasn't leading to the downside.
The Monday-afternoon rally in tech stocks left many other parts of the market closer to their lows of the day than to the break-even point. Energy, Materials and Industrials all sectors that perform well in a healthy growing economy, posted big losses. Real Estate, Health Care and Financials also lost a lot of ground, suggesting traders have gotten a lot less bullish about the economy since last week when those sectors held up better than the tech sector.
Some of the weakness in Financial Services can be blamed on a big report about money laundering that was released over the weekend. Our analysis is that this is unlikely to amount to much, as most of the banks mentioned are so large and systemically important that governments are unlikely to impose major new regulatory costs or penalties at a time when they are trying to spur lending activity.
Monday's selling seems like a confluence of two factors.
The first, rising coronavirus cases in the U.S. and Europe. We've seen this play before, and the usual suspects, tech and other so-called stay-at-home stocks do well, while most of the market crumbles.
The second factor is the death of Supreme Court Justice Ruth Bader Ginsburg. The market, and the economy, were looking to Washington for more support to get through the pandemic, but a potential fight over the Supreme Court seems like it has ratcheted up tensions between the political parties. After some whispers about progress toward a new stimulus bill last week, Monday brought news that talks about funding the government through December were not progressing well.
Government funding is set to expire on Sept. 30, raising avoiding a shutdown ahead of the election to the higher priority than a new economic stimulus package. The tension around the Supreme Court seems likely to make reaching any deal more difficult, much less two deals.
Economic Events this WeekTuesday
- 10:00 a.m. - Existing Home Sales
- 9:00 a.m. - FHFA Housing Price Index
- 10:30 a.m. - EIA Crude Oil Inventories
- 8:30 a.m. - Initial Claims
- 10:00 a.m. - New Home Sales
- 8:30 a.m. - Durable Goods