Today’s Market Update
June 11, 2020
The 4th Biggest Point Loss Ever
Dow Drops 1861 Points
Worst Day for Stocks Since March 16
It has been a while. This is the first Market Update since April 21. As I have noted, I will send out my Market Update on days that 2 or more of the major U.S. stock indexes falls greater than 3%. Today they all did. As the table below shows, all four fell more than 5%, with the Dow down nearly 7%. The Dow suffered its 4th worst point drop in history today.
Fears over a weak recovery in the U.S. economy crushed stocks in the current stock market rebound. And a rebound it has been. The S&P 500 bounced-back more than 45% since the March 23 bottom through yesterday. The Dow Jones Industrial Average got hit hard, as noted above, careening 6.9% lower. Today’s loss took back a large chunk of its strong gains over the last three weeks. All 30 Dow stocks were down today. As were 499 of the S&P 500. All 11 sectors declined. Volume was high. The volatility index skyrocketed as the VIX soared nearly 48%.
Second wave worries were a big catalyst knocking stocks down today. Fear cleared out excessive complacency today. The travel and economic recovery companies sold sharply, scaring away speculators in those stocks. Fears of a second Covid-19 wave spread quickly as data from Johns Hopkins University showed rising infection rates in 21 states. Hospitalizations have increased in nine states including Arizona, California and Texas.
As I wrote in today’s ERPE Excerpts, don’t fight the Fed. Yesterday the Federal Reserve said they would keep interest rates near zero until 2023. While a “too far too fast” market rally since the March low, the Fed remains committed to do what ever it takes to boost the economy. As history shows, that is good for stocks.
After a ‘V’ shaped pattern formed in the stock market’s chart, profit taking was to be expected. After falling around 35% from its late February high to late March low, the S & P 500 soared over 45% through yesterday. Here’s the chart:
Today’s 1861 Dow point decline replaces March 11 as the 4th worst point drop in history…
A day after the NASDAQ hit 10,000 for the first time ever, all major stock indexes were hit today. Here’s today’s scorecard:
I stated this in the last Market Update April 1, “One of the most alarming traits of the stock market in the first quarter – with respect to the Dow – was the frequency of 1,000 point daily moves.” That had, until today, stopped. Volatility is spiking again. It is up to watching near term market behavior to determine if today was just a one-day profit taking event, or the beginning of a trend change in the stock market.
Here’s some word of wisdom from a great teacher and even greater investors, Benjamin Graham (he was Warren Buffet’s professor).
“The individual investor should act consistently as an investor and not as a speculator.”
Hope this is helpful.
Thank you for your continued trust and confidence. I remain vigilant as I manage and oversee your investment account.
John