Yahoo Finance’s Brian Sozzi and Alexis Christoforous discuss the passing of Supreme Court Justice Ruth Bader Ginsburg and what it means for the stock market and voters with Raymond James Washington Policy Analyst, Ed Mills.
ALEXIS CHRISTOFOROUS: I want to bring in Yahoo Finance's Emily McCormick, who has been tracking the early stock market action. And Emily, it looks like those high-flying tech stocks that sent the market to record highs over the summer are exactly what's dragging us lower today.
EMILY MCCORMICK: That's right, Alexis. And taking a look at the pre-market moves, we do have those tech shares sharply lower and extending the past few weeks worth of declines now. Those previously high-flying tech names like Apple, Amazon, Facebook, Alphabet, Netflix, and Microsoft all heading lower here in the pre-market session.
We also have chip makers including Nvidia and Advanced Micro Devices each off about 2% in pre-market trading, also contributing to that drawdown that we're seeing in tech names. Now, broadening out, taking a look at those three major indices, we have those on track to add to the past three weeks worth of declines. The S&P 500, as of Friday's close, was already at its lowest level in more than a month and then pulled back a total of more than 7% from its recent closing high as recent as September 2, so just earlier this month.
Now, taking a look at what analysts are saying is really contributing to this pullback. Nicholas Colas of DataTrek wrote in a note this morning. He said that three main factors were at play here.
The first is the weakness that we've been seeing in real time economic indicators. So those are things like jobless claims, that estimates missing retail sales report we got last week, and others that are pointing to a slowdown in the economic recovery. Second of all, we are seeing a stagnation in terms of movement on a fiscal stimulus bill out of Congress. That's something that could potentially reverse the slowdown that we're seeing in economic activity. But of course, not seeing any progress there.
And then third is that lackluster forecast we received from the Federal Reserve in its summary of economic projections last week. Now, outside of these factors, we also have a-- really, a stagnation that we're seeing in coronavirus case improvement in the US and abroad, also contributing to investor jitters here. We also have political uncertainty both around the presidential election and now over who might become the next Supreme Court Justice at play. So a number of contributing factors this morning all leading to this drawdown of 2% plus, really, that we're seeing here, Alexis.
ALEXIS CHRISTOFOROUS: Now, a dizzying amount of information that investors need to digest here to start the new trading week. We have to touch on Nikola, though, down about 27% here in the premarket. We received word this morning that its founder and executive chairman Trevor Milton, who's been on our show a number of times, now deciding to step down. What can you tell us?
EMILY MCCORMICK: Well, this was an unexpected move, Alexis, coming overnight from Trevor Milton. He posted on his personal Twitter page that he would be stepping down effective immediately. He's going to be replaced by Stephen Girsky, former vice chairman of General Motors. He's a member of Nikola's board now. And he's been appointed as chairman of the board effective immediately as well.
Now, these moves coming in the wake of allegations from the short seller Hindenburg that Milton and the company made false statements to investors. Now, that report first came out September 10. Nikola has released a couple of statements in the past couple weeks in the wake of this, calling it a quote, "false and defamatory report."
Now, in his statement this morning, Milton himself wrote, quote, "the focus should be on the company and its world-changing mission, not me. I intend to defend myself against false allegations leveled against me by outside detractors." Now, taking a look at what Wall Street is saying about this move, Dan Ives of Wedbush out already with a note this morning, calling this, quote, "while there will be a lot of worries on the street around Trevor's departure, especially in light of the bear noise recently with the company, going forward, Nikola has a strong bench, and now it's all about execution going forward with the General Motors partnership, a linchpin to its success. In a nutshell, Nikola is still a prove-me stock, which speaks to why we are watching this from the sidelines with a neutral rating." Now, as you mentioned, seeing those Nikola shares sell off further in pre-market trading, down to just about $25 per share, Alexis?
ALEXIS CHRISTOFOROUS: All right. Emily McCormick, thank you. Now, part of the reason for today's volatility, of course, the new questions over the state of the presidential race after the death of Supreme Court Justice Ruth Bader Ginsburg.
The president and Senate Republicans pushing to fill that seat as quickly as possible while Democrats demand they wait in a repeat of what we saw happen in 2016. Ed Mills is Washington policy analyst at Raymond James. He joins us now.
Good morning, Ed. You know, there's this new poll out, a Reuters Ipsos poll, that shows more than 60% of Americans want lawmakers to wait on filling that vacancy until after the election. What are the chances that the GOP is able to ram something through before the election or right after?
ED MILLS: Yeah, Alexis. I think at this point, I think the chances are pretty high. We've seen two senators so far on the Republican side come out and say that they won't confirm, but you still need two more. I think any tie would be broken by vice president Mike Pence.
The two senators that have come out so far would have been the top two that you would expect. And for Susan Collins in Maine, I think it would have been more shocking for her given how close her re-election fight is-- and she finds herself down in the polls-- for her to come out and say that she would support this. So the base case right now is that Republicans have a good shot at filling the seat.
But things are going to change extremely rapidly in this fight. So nothing is certain right now in terms of the pick, in terms of the market impact, in terms of the political impact. So this is a story we have to watch very closely.
BRIAN SOZZI: Ed, justifiably so here, lots of focus off of this with regards to the fate of the Affordable Care Act. Can you at least frame the market risk if the Affordable Care Act is repealed?
ED MILLS: Yeah. So at issue is the fact that the Supreme Court has on its docket another kind of challenge to the Affordable Care Act Obamacare. And it was based upon a lower court decision that because the individual mandate had been struck, that the whole thing should be struck down.
In a kind of court that included Ginsburg, I think it was clear that people thought it was going to be a 5-4 decision keeping the ACA. With her gone, it looks like it is going towards a 4-4 decision-- or that's the immediate response. And so the lower court decision potentially striking down the whole case remains.
There's a lot of things that either the court or Congress could do to prevent that outcome. But what I do expect is weakness in managed care names. As I've spoken with our health care policy analyst Chris Meekins, it's been a flood of phone calls over the weekend from Raymond James investors and clients trying to figure out the market impact of that. Longer term, because of this case, I do think that the Biden campaign is going to try to make the November election more of a referendum on health care. And so health care being in the focus, you could see underperformance overall in health care.
ALEXIS CHRISTOFOROUS: Ed, is this Supreme Court vacancy a game changer for President Trump's struggling re-election campaign? I mean, you've now got Biden leading President Trump, I think by 8 points, in some of the battleground states.
ED MILLS: Yeah. In a report we put out this morning, what we said is that it's too soon to tell. You can make a pro-Trump argument. You can make a pro-Biden argument.
The pro-Trump argument is that he has been pursuing a base strategy. He does need higher turnout among supporters, though probably biggest thing to get turnout among Republican-based voters is a vacancy on the Supreme Court. However, there is a chance that it is going to be viewed based upon what you said on that Reuters poll, that it is going to be viewed as overly partisan. Democrats have seen a massive influx of fundraising since the passing of Ruth Bader Ginsburg and could see energy on their side. So I think we could look too much into exactly the impact of this we have to see how the next steps play out before we have a good tell of how this is impacting the presidential election.
ALEXIS CHRISTOFOROUS: So on Fox this morning President Trump says he expects to have his pick named either Friday or Saturday. On the short list, two female judges, Amy Coney Barrett and Barbara Lagoa, both conservative, both Roman Catholic. But when you look at these two women, does Lagoa paint a more positive picture for Trump because she hails from Trump's must-win state of Florida? She's also of Cuban descent, which could hit-- help him with Latino voters, which we know right now are swinging Biden's way.
ED MILLS: Yeah. So for Lagoa, I think if you are looking at it from a purely political lens, Florida is a must-win state for President Trump. And when you look at the crosstabs of polling data, the area that he is doing better than probably expected is with Cuban American voters in the state of Florida. That certainly could help him there.
And then importantly, Lagoa got her confirmation in the Senate pretty recently in a very partisan environment. And it was 85 votes in favor of her confirmation. What I have heard is there are some concerns within conservative circles about her record because it's not very robust yet.
And so they don't necessarily know what they are getting either on the conservative or liberal side with Lagoa. So that could be one of the few reasons that could, you know, hold Trump back in making that selection. But she is someone absolutely to watch.
ALEXIS CHRISTOFOROUS: All right. Much to be seen here in the coming days. Ed Mills of Raymond James, thank you.
ED MILLS: Thanks, Alexis.