Dow Plunges as Stimulus Hopes Die With Justice Ginsburg
- The Dow Jones plunged 800 points Monday.
- Concerns around lockdowns in Europe and political in-fighting in the U.S. weighed on markets.
- Nordea Asset Management fears the Dow’s pullback could be more serious.
The Dow Jones struggled on Monday, as everything that investors were worried about last week got a whole lot worse.
Dow Jones Falls as Worries Stalk Wall Street
All three major U.S. stock market indices came under pressure on Monday, as the Dow Jones and S&P 500 fell over 2%. A more robust tech sector helped the Nasdaq limit losses to 1%.
Regarding coronavirus, things are steadily deteriorating in Europe. As the United Kingdom considers another national lockdown, and nations like Spain and France face a spike of record cases, risk sentiment plummeted across the Atlantic.
It is not all bad news as deaths and hospitalizations have not kept pace. Unfortunately, these key metrics are on the rise, dimming the outlook for global growth and pandemic recovery in the U.S.
Aside from the pandemic, there are significant worries about the state of government, which is directly impacting Wall Street’s mood.
Justice Ruth Bader Ginsburg died on September 18. The stand-off over whether it is appropriate to replace her on the Supreme Court has destroyed any hopes of fiscal stimulus being passed. Watch the video:
U.S. economic activity has been stagnating for the last few weeks, and the latest news will not change that perception.
Having already thrown the kitchen sink at the economy, Congress is running out of ammo. It’s also entirely possible that stocks were wobbling after a report showed that U.S. government debt rose an astonishing 52% in the second quarter.
Combined with Joe Biden’s proposed capital gains tax, the stock market appears to be finally waking up from a bullish fever over the last few months.
Nordea: Stock Market Correction Looks “More Serious”
The big question on investors’ lips is whether this is once again a buying opportunity or if it’s the start of a more severe decline. Watch the video:
Sebastian Galy, a senior economist at Nordea Asset Management, has been cautiously optimistic about the market rally while calling for a near-term pullback. He told CCN.com:
The difference between a shot across the bow and something more serious is that we fail to see a rapid rebound in the carry trade. If we fail to get one in the next few days, longer-term investors are likely to reduce their positions. Indeed, according to a fund survey of Bank of Merrill Lynch survey Tech stocks are the most crowded of all time. Banks who have quite an insight into financial markets have piled into US Treasuries. Hence, the odds are this is something more serious.
Dow 30 Stocks: Heavy Selling in Financials
The Dow 30’s lack of tech exposure made it particularly exposed to the selloff on Monday, as Apple’s gain provided little support.
Elsewhere, the heavy selling was most pronounced in bank stocks, as JPMorgan Chase tumbled 4% with allegations of money laundering gripping investors’ attention. Watch the video below for more.
3M, American Express, Caterpillar, and Dow Inc. each fell more than 5%.
Of that handful of stocks in the green, value play Walmart managed a 0.5% gain. Microsoft climbed after a $7.5 billion acquisition of one of the world’s top video game creators (Bethesda Softworks).