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  • S&P 500 lost 188.04 points, or 5.9%, to end at 3,002.10.
  • The Dow Jones Industrial Average ended down 1,861.82 points, or 6.9%, to 25,128.17.
  • The Nasdaq Composite lost 527.62 points, or 5.3%, to close at 9,492.73.

We witnessed some of the worst performances from US benchmarks on Thursday as the new cases of COVID-19 in the US are seen as weighing on the camels back. 

Reuters reports that the US coronavirus cases top two-million, the highest in the world finally took their toll on investor sentiment, a day after when the Federal Reserve has raised the alarm.

Wednesday’s wake up call meeting and virtual press conference held by a pessimistic Fed Chairman, Jerome Powell, was the death knell for markets. A sobering comment from the Fed Chair, when he said that many millions of jobs may never come back, has resonated with speculators now fearing a very bleak outlook for the US and global economy. 

Benchmarks plummet and VIX rallies 

  • Biggest decline in the S&P 500 since mid-March, losers fit well with second virus wave fears

S&P 500 lost 188.04 points, or 5.9%, to end at 3,002.10. The energy sector SP500.10 plummeted by 9.5% while financials SP500.40 dropped  8.2%.

The Dow Jones Industrial Average ended down 1,861.82 points, or 6.9%, to 25,128.17 which was also the worst daily drop since March 16.

The All 30 of the blue-chip index’s components was dragged lower led by Boeing Co. BA, -16.42% and Dow Inc. DOW, -9.91%.

The Nasdaq Composite lost 527.62 points, or 5.3%, to close at 9,492.73 giving back gains above its highest levels on record through the 10,000’s. 

As a result, the volatility measures were taking up fresh bullish territory as well:

  • CBOE volatility index ends up 13.22 points at 40.79.
  • Biggest daily point gain for VIX since March 16.
  • Highest closing level for VIX since April 23.

Shaping the narrative

Analysts at ANZ Bank explained that “with correlations across asset classes again high and major moves in markets being put down to ‘risk on’ or ‘risk off’ markets tend to flip-flop from one narrative to the other, and often the narrative is fickle.”

Today the slump is being blamed on the lack of a V-shaped recovery in the US, and on fears of a second wave. Is that news? Not really – we always thought that.

The reality – risk assets got here on liquidity and weak arguments (“there is no alternative”) and a retracement was always a possibility.

Everything the Fed Chair Powell said yesterday was eminently sensible, and they did commit to QE at least at its current pace, and their projections point to more easing going forward, so liquidity won’t be a problem and it feels like the market is just looking for a scapegoat.

 

DJIA levels

 

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