The Dow was up nearly 350 points in the morning indicating that investors were already shrugging off the impending default of China’s Evergrande. Then it started gradually sinking again with all three indexes closing at about break-even. If Wednesday’s Fed meeting goes as expected, it should calm the markets again. Meanwhile, having never heard of Evergrande before yesterday, I took a quick look at their numbers for the last 11 years and what popped right off the page was their enormous debt. After that there was their extraordinarily thin profit margins which have shrunk 90% in the last ten years.
This among other things should have been gigantic red flags for any investor. Instead, because Evergrande was so enormous, everyone was buying the bubble while it should have been apparent that they were operating right on the edge and any upset to that delicate balance could prove disastrous. Evergrande’s debt payments were due on Monday and they have not paid yet but they have also not defaulted yet so who knows? Contrary to Monday’s huge volume, Tuesday’s volume was just a little below average at about 9.7 billion.
TUE
SEPTEMBER 21, 2021 4:43 PM
Wall Street ends near flat on
cautious note ahead of Fed
DJ: 33,970.47 -614.41 NAS: 14,713.90 -330.07 S&P: 4,357.73 -75.26 9/20
DJ: 33,919.84 -50-63 NAS: 14,746.40 +32.50 S&P: 4,354.19
-3.54 9/21
NEW
YORK (Reuters) - U.S. stocks ended near flat on Tuesday after a broad sell-off
the day before, with worries over troubles at developer China Evergrande and
caution ahead of Wednesday’s Federal Reserve policy news keeping a lid on the
market. Trading was choppy, with the Dow
and S&P 500 erasing session gains just before the close, while the Nasdaq
finished slightly higher. Shares of Walt
Disney Co fell 4.2% and were the biggest drag on both the S&P 500 and Dow
after Chief Executive Officer Bob Chapek said the resurgence of the Delta
variant of the coronavirus was delaying production of some of its titles. Concerns over China Evergrande Group have put
investors on edge and added to recent worries over economic growth from the
Delta variant.
Persistent default fears overshadowed efforts by Evergrande’s
chairman to boost confidence in the firm on Tuesday, while Beijing
showed no signs it would intervene to stem any effects across the global
economy. “People have been preconditioned to buy pullbacks for most
of the last year plus,” said Michael James, managing director of equity
trading at Wedbush Securities in Los Angeles.
“But that overhead
nervousness is still there,” he said. “The Evergrande situation is still
a black cloud hanging over
global markets. Combine that with uncertainty with Fed commentary coming
tomorrow, and there’s a reluctance to get overly aggressive on the long side.” Investors are waiting for the end of this
week’s Fed meeting that
may shed light on when its massive purchase of government debt will begin to
ease. Officials will reveal new
projections as investors also are on alert for any timing on rate tightening.
The
Dow Jones Industrial Average fell 50.63 points, or 0.15%, to 33,919.84, the
S&P 500 lost 3.54 points, or 0.08%, to 4,354.19 and the Nasdaq Composite
added 32.50 points, or 0.22%, to 14,746.40. S&P 500 industrials
led losses among sectors.
Adding to late-day bearishness, shares
of American Airlines Group Inc and JetBlue Airways Corp fell after records in
Boston federal court showed the United States and several U.S. states on
Tuesday filed an antitrust lawsuit against the companies. American Airlines
ended down 2.8% while JetBlue fell 4.8%.
The S&P 500 index traded below its 50-day moving average,
its first major breach in more than six months. The average has served
as a floor for the index this year. Analysts
say a breach of the index’s 200-day moving average may now be in sight.
Advancing issues outnumbered declining
ones on the NYSE by a 1.32-to-1 ratio; on Nasdaq, a 1.35-to-1 ratio favored
advancers. The S&P 500 posted no new
52-week highs and six new lows; the Nasdaq Composite recorded 41 new highs and
98 new lows.
Volume on U.S. exchanges was 9.73 billion shares, compared with the 9.95 billion average for the full session over the last 20 trading days.
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