The stock market showed strength at the open before falling hard as hopes a final push for a coronavirus stimulus ahead of the presidential election fueled sentiment — and more in Monday’s stock market update.
House Speaker Nancy Pelosi, D-Calif., said over the weekend that Treasury Secretary Steven Mnuchin must reach an agreement within 48 hours if they want to pass a coronavirus stimulus relief bill before Election Day.
The 48 hours would be by the end of the day Tuesday. Negotiations would still continue afterwards if a deal isn’t reached, but it wouldn’t get done in time for the election. However, late day selling pressure returned after President Donald Trump said Pelosi has no desire to get a deal done, with the major indexes settling near their session lows.
The Nasdaq tumbled 1.7% after testing a late-day low of 11,454.
The S&P 500 sank 1.6% with the afternoon low tagging 3,419.
The Dow dropped 1.4% following the final-hour fade to 28,139.
The Russell 2000 was down 1.2% after closing on the session low of 1,612.
Energy paced sector laggards after tanking 2.1% while Technology and Communication Services declined 1.8%. There was no sector strength.
OraSure Technologies Inc. (Nasdaq: OSUR) shares zoomed nearly 16% after announcing its DNA Genotek subsidiary has received Emergency Use Authorization from the FDA for the use of its OMNIgene ORAL saliva collection and stabilization device for COVID-19 testing.
This week’s parade of earnings could produce wider price swings for stocks and the major indexes, and the key indicator to watch will be the volatility level. The index has remained trapped between its 50- and 200-day moving averages for 27 trading sessions, with the major indexes mired in seven-session ranges.
The chance of another run towards all-time highs — or a breakdown out of the current trading range — will depend if the VIX closes below 25 or above 30 over the near-term. The 50-day moving averages for the major indexes have been in a solid uptrend since mid-May and could start to level out if the action remains choppy.
European markets finished lower as surging COVID-19 cases raised the possibility of further economic restrictions.
UK’s FTSE 100 fell 0.6% and Germany’s DAX 30 was down 0.4%. The Stoxx 600 dipped 0.2% while the Belgium20 and France’s CAC 40 slipped 0.1%.
Asian markets closed mostly higher after China reported third-quarter GDP growth was up 4.9% from a year ago, versus forecasts of 5.2%. That brings growth for the first three quarters of the year to 0.7% from a year ago.
Japan’s Nikkei rallied 1.1% and Australia’s S&P/ASX 200 gained 0.9%. Hong Kong’s Hang Seng added 0.6% and South Korea’s Kospi was up 0.2%. China’s Shanghai fell 0.7%.
The iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT) extended its losing streak to three straight session following the intraday pullback to $160.05. Near-term and upper support at $160.50-$160 was breached but held. A move below the latter would indicate additional weakness towards $159.50-$159 and the 200-day moving average.
Lowered resistance is at $161-$161.50 with additional hurdles at $162-$162.50.
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was up for the sixth straight session after testing a high of 29.69. Current and lower resistance at 29.50-30 was tripped but held. A move above the latter would suggest a retest towards 30.50-31 and the 200-day moving average.
Rising support is at 27.50-27 followed by 26-25.50 and the 50-day moving average.
The S&P 400 Mid Cap Index (NYSE: MID) fell for the second straight session despite tagging an opening and fresh monthly high of 2,103. Current and lower resistance at 2,000-2,025 was cleared but held. A close above the latter would indicate a run towards 2,075-2,100, with the late February all-time high at 2,109.
Upper support at 1,975-1,950 was breached and failed to hold on the tumble to 1,970 afterwards. A close below the latter would likely lead to a further backtest towards 1,925-1,900 and the 50-day moving average.
RSI (relative strength index) is back in a downtrend after failing to hold key support at 60. Continued closes below this level keeps downside weakness towards 55-50 in play. Resistance is at 65-70.
The Financial Select Sector Spiders (NYSEArca: XLF) fell for the first time in three sessions after tapping an intraday low of $24.80. Current and upper support at $24.75-$24.50 was breached and failed to hold on the close back below the 50-day moving average. A move below the latter and the 200-day moving average would indicate a further pullback towards $24.25-$24.
Resistance is at $25-$25.25. A close above $25.50 would be a more bullish development for a possible breakout towards the $26 level.
RSI is in a slight downtrend with key support at 50 failing to hold. Continued closes below this level would signal further weakness towards 45-40. Resistance is at 55-60.
Check back after the closing bell each day for the most important news and numbers in the WealthPress stock market update.