Day Traders Diary

10/28/20

The major averages fell sharply on Wednesday amid concerns over the latest increase in coronavirus infections and its potential impact on the global economy.

The Dow Jones Industrial Average dropped about 940 points, or 3.4%, for its worst day since June 11. The S&P 500 slid 3.5% and the Nasdaq Composite fell 3.7%.

The U.S. indexes took their cues from the European market benchmarks. The German Dax index fell 4.2% to its lowest level since late May. The French CAC 40 slid 3.4%. The FTSE 100 in London closed 2.6% lower.

U.S. coronavirus cases have risen by a record daily average of 71,832 over the past week, data compiled by Johns Hopkins University showed. Meanwhile, coronavirus-related hospitalizations are up 5% or more in three dozen states, according to data from the Covid Tracking Project. Cases are also rising sharply across Europe.

The recent uptick in Covid cases has led some countries to reinstate certain social distancing measures. In the U.S., the state of Illinois has ordered Chicago to shut down indoor dining. In Europe, German officials agreed to a four-week partial lockdown, while the French government imposed new nationwide restrictions until Dec. 1.

Stocks that would be hurt the most by lockdowns or a slowdown in the economy reopening led the declines on Wednesday. Shares of Delta Air Lines fell 4.3%. Royal Caribbean shares lost 5%, while Norwegian Cruise Line and Carnival dropped more than 7% each.

Facebook, Alphabet and Twitter were also down sharply as their respective CEOs testified in front of Senate members. Facebook and Twitter were off by 4.8% and 4.9%, respectively, and Alphabet slid 5%.

The Cboe Volatility Index (VIX), known on Wall Street as the market's "fear gauge," jumped above 40 and hit its highest level since June 15.

Interestingly, longer-dated Treasuries gave up early gains to close little changed. The 2-yr yield and 10-yr yield both finished flat at 0.15% and 0.78%, respectively. The U.S. Dollar Index advanced 0.6% to 93.46. WTI crude futures fell 5.3%, or $2.10, to $37.45/bbl amid the stronger dollar, bearish inventory data, and demand concerns.