The stock market picked a wonderful way to start the new year—with a reminder that markets really can fall now and again.
The S&P 500 fell 1.5% to 3700.65, its largest drop since Oct. 28, while the Dow Jones Industrial Average fell 382.59 points, or 1.3%, to 30,223.89, also its largest decline since Oct. 28. The Nasdaq Composite slid 1.5% to 12698.45, its largest drop since Dec. 9. All three indexes had their worst first day of trading in a new year since 2016.
What caused the decline? “Fresh Covid fears and concerns about the Georgia Senatorial runoff got credit for the selling to start the new year,” writes Todd Market Forecast’s Stephen Todd. “We would add that on the first day, we frequently see some pent up desires to make trades that won’t appear on year end reports.”
Strangely, all of these things were known before the open, when the Dow looked set for a 200 point gain. That leaves the third option: some good old profit taking.
Still, optimism about the vaccine is back at early November levels, when the Pfizer and Moderna vaccines were assumed to be only 70% effective, according to data from Evercore ISI strategist Dennis DeBusschere. That, of course, proved to be far too pessimistic. “In our view, that creates an opportunity,” DeBusschere writes. “We suggest buying dips in reopening stocks.”
First-day declines, however, don’t have to portend doom. In fact, they may not portend anything at all. “The S&P 500’s best year in recent history—1995—started with a small decline on the first day,” writes Ally Invest’s Lindsey Bell. “It’s a 50/50 chance that the market will be up or down following a first day decline.”
Anyone got a quarter to flip?
Write to Ben Levisohn at Ben.Levisohn@barrons.com
January 05, 2021 at 06:03AM
https://www.barrons.com/articles/stock-market-hit-hard-by-covid-fears-why-concerns-may-be-overblown-51609801381
Stock Market Hit Hard by Covid Fears. Why Concerns May Be Overblown. - Barron's
https://news.google.com/search?q=hard&hl=en-US&gl=US&ceid=US:en
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