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Has the Market Made Up Its Mind Yet?

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Another down day of trading to start a new week, following the selloff that began Thursday and Friday last week after setting fresh all-time highs in the Nasdaq and S&P 500 on Wednesday. The Nasdaq is suddenly 10% off its ll-time highs as of Tuesday’s close, with the Tech industry alone down 4.6%. All sectors in the S&P 500 were down on the day, with Energy at -3.7%, including an 8% drop in Natural Gas.

We’re not really seeing anything in the market we weren’t seeing during the weeks and weeks of run-up. There is still no new stimulus package passed by Congress to replace the CARES Act, which expired in late July. We still see outbreaks of Covid-19 in various regions of the country, including a recent report that a motorcycle festival in Sturgis, South Dakota may have spread the coronavirus to an astounding 260K people. Previously, the market had treated news items like these as if they didn’t matter; now the attitude seems to be: maybe they do.

In any case, the Nasdaq fell 465 points, or -4.1% on the day. The S&P 500 lost 95 points, or -2.78%. The Dow pretty much mirrored that performance, losing 632 points, -2.25%. Even the small-cap Russell 2000 index, which had not quite enjoyed the same high levels the other indexes had recently, fell 31 points, or -2%.

Tesla (TSLA - Free Report) was hit hardest of heavily traded names, shedding 21% on being passed over from inclusion onto the S&P 500 as well as electric vehicle competitor Nikola (NKLA - Free Report) finding a major manufacturing partner in General Motors (GM - Free Report) , which happened to be up 8% on the day. But going back to last week, following a huge buying binge of Tesla stock that began after its stock split was announced a month ago, the company started selling off after announcing a new $5 billion stock offering. The market didn’t appear to appreciate this move by CEO Elon Musk very much.

The contagion was then felt over at Apple (AAPL - Free Report) , which had also previously announced its own stock split that sent shares higher. But the stock is now 15% down from its all-time high, with another 6.5% sold off in Tuesday’s regular session. That said, Apple shares are still up 54% year-to-date, and well over 100% higher than a year ago at this time.

Consumer Credit grew by a billion dollars month over month in July, to $12 billion. The NFIB Small Business Index earlier today saw a minor bump up in August to 100.2 from 98.8 reported in July. But these numbers did not move the market in any conceivable way today. In fact, very little real-time reaction to any economic data is one of the hallmarks of this most recent bull market.

This makes it more puzzling to predict going forward, as well — if markets cannot be swayed by economic data, they must then be swayed solely by the whims of traders themselves. So the question is: is the market’s mind made up and the bubble has now been popped, or is there something that might change the market’s attitudes back to where they were a week ago? Also: would there be a conceivable reason why?

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