Global markets ended the day sharply lower on surging coronavirus cases, election uncertainty and fading stimulus hopes. European markets were slammed after German software company SAP SE (SAP) warned that lockdowns and muted demand would cut into earnings and revenues sending the stock down -23.23%. US equities followed on broad based selling and the DJIA was down more than 800-points in the afternoon before trimming losses. Economic data disappointed with September New Home Sales down -3.5% vs. expectations of +1%. Travel stocks were hit hard by the threat of new shutdowns and casinos, airlines, cruise lines, restaurants and hotels were some of the worst performing Industry Groups. Every sector was red led down by a -3.77% drop in Energy (XLE). Industrials (XLI), Materials (XLB), Communication Services (XLC), Financials (XLF) and Technology (XLK) were all down more than -2%. The DJ Transportation Index and small cap Russell 2000 were the biggest losers. The NASDAQ tumbled for the seventh time in 10 days sliding 189.34 points (-1.64%) to 11358.94. The Dow dropped 650.19 points (-2.29%) and finished at 27685.38, while the S&P 500 fell 64.42 points (-1.86) and closed at 3400.97.

Breadth was bearish with declining issues beating advancing issues 7:1 on the NYSE and 4.5:1 on the NASDAQ. Volume was light but declining volume was 90% on the NYSE and 70% of the NASDAQ. The VIX jumped to its highest level since 9/3 rising 4.91 (+17.82%) finishing at 32.46. Crude oil prices hit a three-week low falling 1.34 (-3.36%) and the December contract closed at $38.51 a barrel. Gold prices eased 0.30 (-0.02%) and closed at $1904.80 an ounce.

Investors threw in the towel today on hopes for a stimulus to prop up the economy until a vaccine for Covid-19 could be available. Stocks sold off on the stalemate and the ‘Washington Washout’ sent the major averages briefly below their respective 50-day moving average (MA). The DJIA and S&P 500 closed below that support level. The different indexes have been range bound for most of September and October and more selling could send the market down to the bottom of the range to the September lows. However, the fact that most of the other indexes regained their 50-day MA and today’s action was on low volume could bring in dip buyers tomorrow. Expect a highly volatile week on the busiest week of earnings and the upcoming election.

Earnings releases to watch for on Tuesday include: 3M co (MMM), Advanced Micro Devices (AMD), BP PLC (BP), CH Robinson Worldwide (CHRW), Caterpillar (CAT), Chubb (CB), Crocs Inc (CROX), Dexcom (DXCM), Eli Lilly (LLY), Gaming and Leisure Properties (GLPI), Harley-Davidson (HOG), JetBlue Airways (JBLU), MarketAxcess Holdings (MKTX), Merck & Co (MRK), Microsoft (MSFT), Pfizer (PFE), Sherwin-Williams (SHW), Solarwinds (SWI) and Waters Corp (WAT).

Tuesday’s Market Moving Economic Calendar: Durable Goods Orders, Case-Shiller House Price Index and Consumer Confidence.

By David L. Blake, CMT