Stocks Fall, Fear Rises
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Saved by the bell…
Why did the major U.S. stock indexes all fall ONLY over 3% today? Thanks to the bell! The market’s closing bell went off to stop the sell-off! It was one the ugliest trading days of the year. The worst since February 8th. It was indiscriminate. Volume was extremely high with over 90% on the sell side. The major indexes all closed at their lows for the day, again thanks to the sound of the closing bell. Momentum was so strong to the down-side that, from my experienced eye, they would have fallen meaningfully more. Unless the overseas markets spark a turn around, tomorrow’s open will continue where today closed – – heading lower. True to form, as stocks fall, fear rises. Today, in the face of the U.S. stock falling more than 3%, the “Fear” index (VIX) soared higher over 40%. Forty percent!
As a result, the ultimate fight of between the emotions of fear and greed, fear is winning…at least since when I wrote my last “Market Update” just last Friday. It is true, “what goes up, must come down.” Greed drives stocks up, while fear drags stocks down. As I wrote Friday, we expect volatility in October. More than 50% of 10% corrections occur in October.
Why? Interest rates. Still. Now, though, earnings fears were a catalyst to the stock plunge. Trade and tariff talks are a concern as they may adversely affect revenues and earnings, which determine valuations. The expected “flight to safety” occurred today as the “soups, soaps, cereals” (and bonds) were bought.
What now? More of the same. We are diversified and defensive. That will not change. My biggest concern is a technical one. Not fundamental. The fundamentals, both of the stocks we own and the macro economic conditions, are fine. The NASDAQ’s probable correction, specifically its breach of its 200-day moving average, is my concern. I watch that carefully, mindful of where it has come from. See the chart below…
Yes, the NASDAQ cratered 4% today. Yet, still higher by 13% in the last 12 months.
On a positive note…
CVS, Aetna win U.S. approval for $69 billion deal.
Pharmacy chain CVS Health Corp won U.S. antitrust approval for its $69 billion acquisition of health insurer Aetna Inc., the Justice Department said today, paving the way for a combination. Shares of CVS and Aetna each rose about 1% today. A good win in a bad day. The deal is on track to close early in the fourth quarter. CVS first announced plans to buy Aetna last December. And has been a BAM core hold since. |
| Thank you for your continued trust and confidence. I remain vigilant as I manage and oversee your investment account.
Please call anytime you have a question or I may be of help. I am always happy to be of service. Sincerely, John Gardner
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