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Stock market angst is linked to the lack of a new coronavirus stimulus

Brian Sozzi
·Editor-at-Large
·2 mins read

Buyer beware.

The S&P 500 is flirting with a record high and there is a re-rotation back into big cap tech stocks like Apple as traders feast on easy money from the Federal Reserve. But stay disciplined, pros say. Wall Street is growing antsy that the lack of a new a stimulus plan from bickering lawmakers is setting investors up to be walloped by a lackluster winter of economic data.

“The market is not reflecting what most of the Americans are going through right now,” said AdvisorShares CEO Noah Hamman on Yahoo Finance’s The First Trade. Hamman is advising clients to become more cautious into the Nov. 3 presidential election by, in part, raising cash via selling winning stock positions. Prudential Financial chief market strategist Quincy Krosby is also recommending caution as stimulus talks drag out with no positive outcome in sight.

Says Krosby, “Unless we have stimulus, it will slow the pace of recovery. We’re getting to the election and we’ll probably have another pullback. What we probably need is for the market’s to have more clarity — and will there be a stimulus package by a Biden administration early on and how hefty will that be.”

The under-the-radar growing angst in the market around a stimulus package is front and center in Wednesday’s trading session.

Losses gained steamed for the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite throughout the day on the latest bit of negative stimulus news. Treasury Secretary Steven Mnuchin said that achieving a stimulus deal before the November election and advancing any measures through Congress would be “difficult.” The remarks came shortly after House of Representatives Speaker Nancy Pelosi and U.S. Treasury Secretary Steven Mnuchin spoke on the phone Wednesday morning to discuss further stimulus, in a conversation Pelosi’s spokesperson earlier called “productive.” The two are set to speak again Thursday.

The newest impasse will leave investors to stew on red flags on the economy within third quarter earnings from big banks such as JPMorgan and Citigroup.

“Post JPMorgan and Citigroup 3Q20 earnings on 10/13, despite headline earnings beats, the top 7 banks sold off by 320bps (vs. only 60bps for the S&P 500), which we believe reflects macroeconomic concerns, rather than weakness in the results,” notes Goldman Sachs bank analyst Richard Ramsden.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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