There was a sharp downturn in all the indexes today which at least in this Reuters report is attributed to the feared collapse of the Chinese company Evergrande and that it might bring the entire global market down. (Am I the only one who's never heard of Evergrande before today?) There’s also the usual nerves over Wednesday’s Fed meeting but I guess the best analysis came from today’s expert at Wells Fargo, “I guess it’s the China news but it’s not altogether surprising given how bullish people were.” In other words, it’s a fragile market and any scary event can bring it all down. 

The S&P is down 4% in 3 weeks and the geniuses at Morgan Stanley are being particularly gloomy predicting it will go to 10% and perhaps 20.  The problem with the Morgan Stanley forecast is that the 10% is based on Fed tapering while the 20% is on stalling growth. This makes no sense since the Fed has made it clear that there will be no tapering without continuing growth. And it was not mentioned below but another article I read attributed today’s massive sell off to the Congress once again pulling its stunt from July 2011 and threatening to refuse to raise the debt ceiling to pay for all the stimulus. One thing’s for sure. Everyone’s nervous, as was expressed in the elevated volume of 12.2 billion. 

MON  SEPTEMBER 20, 2021 4:32 PM 

Wall Street ends sharply lower in broad sell-off

By Caroline Valetkevitch

DJ: 34,584.88  -166.44        NAS: 15,043.97  -137.96         S&P: 4,432.99  -40.76      9/17

DJ: 33,970.47  -614.41        NAS: 14,713.90  -330.07         S&P: 4,357.73  -75.26      9/20

NEW YORK (Reuters) - Wall Street fell in a broad sell-off on Monday, with the S&P 500 and Nasdaq suffering their biggest daily percentage drops since May, as fear of contagion from potential collapse of China’s Evergrande drove investors out of equities in a flight for safety.  The Nasdaq also hit its lowest level in about a month, but indexes pared losses just before the close to end well off their lows of the session. The Nasdaq was down more than 3% during the day.  Microsoft Corp, Alphabet Inc, Amazon.com Inc, Apple Inc, Facebook Inc and Tesla Inc were among the biggest drags on the Nasdaq and the S&P 500.  All 11 major S&P 500 sectors were lower, with economically sensitive groups like energy, which fell 3%, down the most. Defensive sectors including utilities were down the least.

Investors also were nervous ahead of the Federal Reserve’s policy meeting this week.  The banking sub-index dropped 2.9% while U.S. Treasury prices rose as worries about the possible default of Evergrande appeared to affect the broader market.  “You kind of knew that when there was something that caught markets off guard, that it was going to lead to probably a bigger sell-off and you didn’t know what the reason would be,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.  “I guess it’s the China news but... it’s not altogether surprising given how bullish people were.”  Wednesday will bring the results of the Fed’s policy meeting, where the central bank is expected to lay the groundwork for a tapering, although the consensus is for an actual announcement to be delayed until the November or December meetings.

The Dow Jones Industrial Average fell 614.41 points, or 1.78%, to 33,970.47, the S&P 500 lost 75.26 points, or 1.70%, to 4,357.73 and the Nasdaq Composite dropped 330.07 points, or 2.19%, to 14,713.90.  The Dow registered its biggest daily percentage drop since July, while the CBOE volatility index, known as Wall Street’s fear gauge, rose.  The S&P 500 is now down about 4% from its Sept. 2 record high close.

Strategists at Morgan Stanley said they expected a 10% correction in the S&P 500 as the Fed starts to unwind its monetary support, adding that signs of stalling economic growth could deepen it to 20%.  Most airline carriers ended higher after the United States announced it will relax travel restrictions in November on passengers from China, India, Britain and many other European countries who have received COVID-19 vaccines.

 Declining issues outnumbered advancing ones on the NYSE by a 5.40-to-1 ratio; on Nasdaq, a 4.66-to-1 ratio favored decliners.  The S&P 500 posted no new 52-week highs and three new lows; the Nasdaq Composite recorded 23 new highs and 193 new lows.

Volume on U.S. exchanges was 12.24 billion shares, compared with the 9.89 billion average for the full session over the last 20 trading days.