Classic Sell The News Response

Friends

Wow, just another crazy day for the markets. Yesterday’s rally was mainly due to expectations that something market friendly would come out of the G7 meeting this morning. Though not specific, the leaders did indicate that they are ready to step in should economies around the globe need help (they will). Stocks traded wildly, but in a relatively narrow channel (well, at least given the last 7 or 8 trading sessions), but about an hour later we got a surprise announcement that the Fed was cutting the Fed Funds rate by a half of a percent. Stocks turned a 400 point loss in the Dow into a 300 point gain in a matter of minutes. But, shortly thereafter, the 10 year note yield began to fall and stocks fell in a “sell the news” type dump. A 300 point gain turned into a 1000 point loss very quickly. We then erased about half of that loss only to see stocks tumble once again into the close.

As I have mentioned, in recent years volatility massively increases after quick corrections (for various possible reasons), and we are seeing that once again in spades. We also mentioned not to read too much into yesterday’s huge rally. Sharp, counter trend rallies (some might say dead cat bounces) are not unusual during these types of corrections/bear markets. This volatility is likely going to continue for a while, so buckle up. We’ll get through it.

As for today, by the close the Dow Jones Industrial Average was down 785 points to finish the day at 25,917. The S&P 500 was down 86 points to close at 3,003. Gold was up $44 to trade at $1,639 per ounce, while oil was up $.60 to trade at $47.35 per barrel WTI.

As mentioned, buckle up-volatility is likely to continue, at least until we get a clearer picture of how the virus is going to be dealt with and what economic toll it is going to take.

Have a nice evening everyone.

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