Hi Everyone,
The major indices all finished the day in the green, despite a decisively bearish start to the session, as the tech sector led a strong afternoon rally on Wall Street. The Dow was up 26 or 0.1%, to 23,750, the Nasdaq gained 106, or 1.2%, to 8,711, while the S&P 500 rose by 12, or 0.4%, to 2,843. Decliners outnumbered advancing issues by a 3-to-2 ratio on the NYSE, where volume remained moderate.
Traders said that today’s late-day rally was impressive as global risk assets were under pressure throughout the day, so U.S. stocks faced strong headwinds. As one trader explained, “Bulls fought back today following two negative days and an overnight scare, but while tech stocks were very strong again, small-caps, industrials, and financials all lagged behind, so investors are still facing an uphill battle.”
The rising U.S.-China tensions were in the spotlight this weekend, as President Trump openly blamed China for the COVID-19 pandemic, sparking a selloff in the Chinese yuan and global risk assets today. The controversial theory that the virus originated from a laboratory in Wuhan already led to serious diplomatic issues, but, so far, there is no evidence that would support those claims. On the other hand, “softer” accusations with regard to the withholding of information at the early stage of the Chinese outbreak seem to be harder to deny, and some analysts fear that they could fuel another escalation of the conflict between the two countries.
High-level officials from Australia and the U.K. also voiced their doubts about the transparency of the Chinese side, especially since the country doesn’t allow international investigation in Wuhan. From an investors’ perspective, the conflict could lead to another blow to global trade, which could hit the already struggling emerging markets the most. The dollar pushed higher against most of its peers today, signaling risk aversion, but Treasuries barely budged, and the strong afternoon rally in stocks could mean that bulls could soon be back in the driving seat.
Warren Buffet’s unusually cautious words gave a lot of bulls cold feet on Saturday. Airlines were smacked especially hard today after Berkshire Hathaway reported that it had liquidated all of its holdings in the subsector. The fact that the “Oracle of Omaha” didn’t use the collapse in March to go bargain-hunting was a negative surprise too. Having said that, this might just mean that the value-conscious Buffett found the outlook too uncertain in light of the pandemic and the worldwide lockdowns, and this was one of the few occasions when he missed a great buying opportunity.
As always, have a great evening and stay tuned!!!
Joe
