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Zacks Investment Research | Sep 11, 2020 02:42AM ET
After a day’s respite on Sep 9, the Wall Street is again witnessing mayhem due to tech selloffs. Dow Jones Industrial Average saw a 1.5% decline on Sep 10. Moreover, the S&P 500 lost 1.8% and the Nasdaq Composite was down 2% on the same day. This downturn, induced by the sharp sell-off in technology stocks, could have been a result of people rushing to book profits, probably due to worries over very high valuations, uncertainty over another pandemic stimulus package, budget negotiations and the approaching elections.
Notably, investors might also blame the seasonal phenomenon here. September is historically considered the worst month for the stock market. Per the LPL Financial (NASDAQ:LPLA) data in a Yahoo Finance article, the S&P 500 has fallen about 1% on average in September since 1950.
The coronavirus pandemic continues to spread in the United States as the economy is seeing an improvement in outlook. The United States alone has recorded more than 6.3 million cases and a death toll of more than 191,000.
Meanwhile, in a historic move, the chief executives of nine drug companies have signed a joint pledge to not submit vaccine candidates for FDA approval before the successful demonstration of the safety and efficacy in large clinical trials. The companies signing the pledge included AstraZeneca (NYSE:AZN), Johnson & Johnson (NYSE:JNJ), Merck (MRCK), Moderna (NASDAQ:MRNA) and Novavax (NASDAQ:NVAX) along with those which are working in collaboration -- Pfizer (NYSE:PFE) and BioNTech, and Sanofi (NASDAQ:SNY) and GlaxoSmithKline (NYSE:GSK). The pledge from the vaccine developers might lead to a delay in the release of the much-awaited coronavirus vaccines.
Also, AstraZeneca, which is developing the coronavirus vaccine in partnership with Oxford University, recently put a hold on global trials, including the late-stage trials. Some unexplained illness observed in a study participant is being considered the reason behind it. Notably, the company is one of the three vaccine developers to begin the Phase 3 trials, which were being conducted in the United States, Britain, Brazil and South Africa. This again has sparked fears among investors regarding the uncertainty of a vaccine introduction.
Investors also seem to be worried about the approaching U.S. Presidential elections. Thus, with elections approaching, investors need to prepare for increased volatility in the broader equities space. Notably, this election year could be worse as the coronavirus outbreak continues to spread.
It is being believed that the earnings results in the third and fourth quarter of the ongoing year might not be as impressive as the second quarter as most analysts have already adjusted estimates.
Furthermore, tensions are building between the world’s two largest economies again. China recently launched a global data security initiative mentioning principles that should be adhered to in areas ranging from personal information to espionage, per a CNBC article. The move is in response to United States’ consistent pressure on China’s largest technology companies. Also, President Trump is seeking to restrict U.S. ties with China. In this regard, it is threatening to punish any American company that creates jobs overseas and forbids those that do business in China through federal contracts. The Trump administration is also considering another ban on China’s cotton, per the sources.
h3 Factors Instilling Optimism/h3A slew of encouraging data indicating that the U.S. economy is gradually returning to the pre-pandemic level is instilling optimism among investors. In fact, the latest jobs data, which showed that the economy added 1.4 million jobs in August and unemployment rate dropped to 8.4% from 10.2%, is an indication of an improving economy. Encouragingly, about half the jobs that were lost during the pandemic have been recovered.
The third quarter has witnessed the rise in U.S. manufacturing activity to nearly a Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
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