(24 September 2020)DAILY MARKET BRIEF 1:Wall Street Makes U-Turn
After a surprisingly bullish session on Tuesday, Wall Street couldn’t keep the pace and slumped to the lowest level since the end of July. Tech stocks were among the worst performers after leading the Tuesday rally.
The stock indexes are hovering near the correction territory as data showed that US business activity is slowing, while the Congress still can’t reach consensus on further stimulus. Thus, the pace of the economic recovery cannot reach the predicted levels, which is even more discouraging ahead of an expected second wave of the pandemic.
The S&P 500 fell 2.37%, with all of its 11 major sectors closing lower. Dow Jones dropped by 1.92%, and Nasdaq tumbled 3.02%, which is the third-largest decline of the current month. Energy was the worst-performing sector amid declining oil prices.
Data from IHS Markit showed that the preliminary US Composite PMI, which merges both the manufacturing and services sectors, slowed down to 54.5 in September from 54.6 in August, as the gains in manufacturing were offset by a slowdown in the larger services sector.
Adding to pessimism in the tech sector, the US Justice Department revealed a legislative proposal that discusses reform in legal immunity for internet firms, which comes in the context of Donald Trump’s attempt to crack down on tech giants.
As for Donald Trump, he said yesterday that he wouldn’t transfer power peacefully to Biden if he loses the 2020 presidential election, adding that the battle would end up at the US Supreme Court. The latter has to replace Ruth Bader Ginsburg, who died last week. The voting on the ninth justice is challenging for the Senate and interferes with the stimulus legislation, which is postponed for a later date.
Asian equities are flashing red on Thursday morning, following the decline in US stocks. Besides fears of a slowing US economic recovery, investor sentiment is damaged by an increasing number of COVID cases in Europe and other parts of the world. Many European countries are re-imposing lockdown measures, which will affect the recovery attempts.
At the time of writing, China’s Shanghai Composite is down 1.21%, and the Shenzhen Component has declined 1.99%.
Japan’s Nikkei 225 has dropped by 1.01%, South Korea’s KOSPI slid 2.17%, and Australia’s ASX 200 is down 0.77%, though departing from daily lows. Hong Kong’s Hang Seng Index fell 1.79%.
European equities should be ready to suffer a similar fate on Thursday, as futures are pointing to a bearish mood.
