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Markets Shed July Gains in One Day: Dow -725 Points

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The negative sentiment that gripped pre-market trading to start the new week only got tighter as the day wore on. At its nadir, the Dow had fallen by the largest amount since late October 2020, -946 points. It closed down 725 points, -2.09%, to fall back under 34K again. The S&P 500 dropped -1.58% or 68 points, the Nasdaq was -1.06%, -152 points, and the Russell 2000 -1.5%, -33 points.

It’s a big shake-out, no two ways about it. But is it something worse? That’s what investors need to discover as this trading week gets off to a very rough start. The Russell is now -10% off its recent highs, and every stock in the Dow 30 hit the closing bell in the red today. As far as the FAANG stocks, only Netflix (NFLX - Free Report) closed slightly higher, ahead of its Q2 earnings release later this week.

New Covid-19 scares, particularly the highly infectious Delta variant, have cast a pall over economic growth projections, at least in certain sectors. But today’s sell-off flushed out all sectors — all 11 in the S&P 500 were lower. Because even though regional Covid outbreaks tend to create regional difficulties, if they happen in enough places at the same time, pretty much everywhere has a chance to be negatively affected.

For instance, currently the state of Florida claims about 20% of all new Covid infections in the U.S., which is directly hitting the travel industry — especially entities like cruise ships. But the Delta variant is global: in Vietnam, factories are being shuttered at Nike (NKE - Free Report) shoe factories, which may face shortages down the road. And on and on: if people begin to stay home again, this will — and has — negatively affect(ed) the Energy space, like ConocoPhillips (COP - Free Report) , -3.2%.

In a nutshell, markets have now shed all July profits. The Nasdaq is on its longest losing streak — five days — since last October. Could this create a near-term buying opportunity? Of course — especially in those sectors least likely to be negatively hit by a wider resurgence of the pandemic. NVIDIA (NVDA - Free Report) was up 3.4% today, for instance. But we enter tomorrow’s market with a shopping list, but not eager to catch a falling knife.

Posting Q2 earnings after Monday’s close is IBM Corp. (IBM - Free Report) , which beat estimates on both top and bottom lines: $2.33 per share outpaced the $2.25 in the Zacks consensus and $2.18 posted in the year-ago quarter, while revenues of $18.75 billion surpassed the $18.24 billion expected. Cloud & Cognitive Software broyght in $6.1 billion in the quarter and Global Business Services made $4.3 billion.

Shares of IBM popped on the news after the bell +3.4%. Shares are up 11.3% year to date but only 10% from this time last year. Though the positive earnings surprise wasn’t really much of a surprise at all: IBM has not missed a consensus earnings estimate since Q3 of 2014.

Perhaps this snap-back in IBM shares reflects a buying sentiment going into tomorrow? We shall see.

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