Out of nowhere. The stock market was by no means having a good day, but it wasn’t a bad day either. Then the last hour of trading started—and it got ugly fast.
The Dow Jones Industrial Average dropped 396.85, or 1.5% while the S&P 500 fell 1.1%, and the Nasdaq Composite, which had been positive around 2:15 p.m., declined dropped 0.9%. The Dow gave back all but 62.82 points of Monday’s 459.67-point gain. The S&P 500 and the Nasdaq snapped five-day winning streaks.
It’s hard to pinpoint exactly what caused the day to go from consolidation after a big gain to giving back nearly all of Monday’s gains. There was no economic data released, nothing that came out about the coronavirus, nothing that should have caused the selling to accelerate.
Was it a sudden realization that coronavirus continues to spread in places like Florida and Texas, and is showing no signs of slowing down? Unlikely, since that could be said just about any day.
Was it headlines from Fed Vice Chair Richard Clarida, who said that the path of the U.S. economy will depend on the coronavirus, that the Fed can do more with its balance sheet and that a double-dip recession is not the base case? None of that was exactly new, or should have been market moving.
Was it reports suggesting that the Trump administration is seeking a $1 trillion stimulus package to be passed by August? That should have been good news, though maybe dollar amount was a disappointment considering Democrats have passed a $3 trillion plan in the House.
Was it the fact that the S&P 500 had been on a five-day winning streak, and winning streaks have to end sometime? Not even Amazon.com (AMZN) and the other FAAMNGs can go up every day.
“There was no particular news to account for the selling on Tuesday,” writes Stephen Todd of Todd Market Forecast. “It looked like profit taking and a sense that perhaps stocks had come too far in a short amount of time.”
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