U.S benchmarks finished Friday on a very ugly note, settling below the December 2018 low, and kicked off this week by gapping lower. The S&P traded to the lowest level since the week after President Trump’s 2016 election. Hopes of massive fiscal stimulus are stalling in the Senate.
S&P responded to the first test of the December 2018 low by gaining as much as 13%. Yesterday, the S&P took out that low, but did not close below it. It has become evident since Monday that the panic is still playing out and we voiced here yesterday that we expected the market to break below 2300.
U.S benchmarks are again on their back foot. After surging right up to the closing bell, the rally then quickly dissipated overnight. One major catalyst for yesterday’s strength was the economic data. ISM Non-Manufacturing was surprisingly strong.
The S&P has now lost more than 500 points and 15% from its fresh record last Thursday. Yesterday’s failure to hold 3050 into the close was a sure sign of more pain to come, something we voiced here in our Technical section.
This marks the S&P 500 fourth straight session and more impressively the NASDAQ’s ninth with record overnight highs. The combination of central bank liquidity, ultra-low/negative rates, lack of negative news and a warrior of a U.S consumer has fueled this market in recent days.
 It’s Jobs Friday and Nonfarm Payroll strong at 225,000. U.S benchmarks are incurring a healthy downtick ahead of the report. Some selling pressures are due to the mounting Coronavirus numbers, but others come as Germany’s economic data echoes a recession.
Stocks around the world are rallying sharply as the People’s Bank of China’s injected another $60 billion in liquidity. All major U.S benchmarks have gained at least 1%. China’s Shanghai Composite finished up 1.34%, a day after opening for the first time in a week and plunging 7.72%.
U.S benchmarks began Sunday night on favorable footing and are working to repair last week’s damage. Benchmarks from China are a different story. After being closed all last week for the Lunar New Year holiday, the Shanghai Composite finished down 7.72% Monday.
U.S benchmarks are ping-ponging between technical levels. Investors and traders alike are showing caution awaiting further developments on the Coronavirus and it’s too soon to know the impact. We mentioned here yesterday that China accounted for one-third of the world’s GDP in 2019.
U.S benchmarks are consolidating lower in a healthy manner. The slightest signs of exhaustion crept into the market Friday with the Russell 2000 small-cap index finishing 1% from a new swing high achieved on the opening bell.