When will the selling stop??!! At one time the S & P 500 was at February 2014 levels. The number of annual new lows for both the S & P 500 and NASDAQ is at the greatest number since November 21, 2008 according to Bloomberg.
The NASDAQ was down almost 14% YTD and 17.3% from its summer apex. The Dow is off 11.3% YTD and over 15.5% from its peak. Every Dow and NASDAQ 100 stock is now down for the year as many household names have been crushed over 40%-50%.
The catalyst for yesterday’s selloff—oil. Crude is off almost 75% since July 2014 and a whopping $10.50 or 29% since the start of the year. Wow! I am not aware of another time when crude has experienced such a dramatic decline.
In my view what today is different than past selloffs because of the massive influence of high frequency trading and exchange traded funds. Because of this massive influence, I think many issues have been excessively sold off thus suggesting great value.
Unfortunately stocks/indices can get oversold and remain oversold for a long period time but ultimately monies do gravitate to shares that represent greater potential return and less amount of perceived risk.
As inferred above, there was a late day rally that reduced the decline in the S & P 500 and Dow by half and briefly erased the losses in the NASDAQ. The advance was focused in small caps and health care issues.
Is money beginning to move to these issues that have been decimated, shares that may represent greater potential return and less amount of perceived risk? For 15 minutes it appeared that a transition was at hand.
What will happen today?
Last night the foreign markets were mixed. London was up 0.46%, Paris up 0.44% and Frankfurt up 0.44%. China was down 4.1%, Japan was down 2.43% and Hang Sang down 1.82%.
The Dow should open nominally lower. The averages are vastly oversold. Earning season continues and analysts expect a 7% decline in profits and a 3.1% drop in sales. The 10-year is up 7/32 to yield 1.96%.