There’s a lot going on behind these dramatic moves—fears of a U.S. recession, worries that artificial intelligence may be overhyped for technology stocks, concern that it’s too late for Federal Reserve interest-rate cuts to help companies’ earnings.
Bond yields moved a little higher. The rate on the benchmark 10-year U.S. Treasury bond was at 3.872%, while the yield on the 2-year note was at 4.002%.
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Market observers trying to make sense of the recent stock market swoon point to a number of factors including geopolitical uncertainty, the unwinding of the yen carry trade, and growing uncertainty the economy. Just don’t blame low volume.
With traders and managers fleeing to the Hamptons and the beaches of New England in August, the month is generally the lowest-volume month of the year. Going back to 2019, the total stock market average daily volume for August is 9.31 billion shares traded, according to Dow Jones Market Data. That average includes trading from New York Stock Exchange, Nasdaq, NYSE American and NYSE Arca exchanges.
Thinner trading is one reason why August is also a typically tougher month for the stock market. When fewer traders are participating in the stock market, it makes it easier for fear to take hold. That’s not what happened on Monday.
Total stock market volume was 15.86 billion on Monday, which was the fifth largest volume day of the year. The highest volume day was 18.1 billion shares traded on March 15, while an average volume this year has been 11.25 billion.
We pretty much count on August to stay choppy based on historical patterns. Just don't expect traders to stay out of the action if things go south again.
DJIA
DJIA (Dow Jones Global)
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The recent stock market swoon might have you thinking a recession is imminent, but the data doesn’t bear that out.
The apparent impetus for the selloff, a weak jobs report, was by no means the end of the world. The U.S. economy still added 114,000 jobs in July. And on Monday, the Institute for Supply Management’s services PMI came in stronger than expected. Sevens Report Research’s Tom Essaye argues that itself pushes back against the recession narrative that’s starting to trickle through social media and Wall Street commentary.
“It was generally ignored by the market yesterday because they didn't want to hear it, but that was an important number,” Essaye says. “I think it just reinforces the point that the data isn't as bad as the market’s reaction over the past two trading days implies. And I think that should give investors some some comfort.”
So why did the S&P 500 nearly join the Nasdaq Composite in correction territory? Essaye argues that while the fear in the market is an overreaction, it does follow a wave of enthusiasm that ignored signs that the economy was losing momentum.
“The soft landing was always going to be bumpy,” Essaye says. “The market kept saying, ‘we're achieving a soft landing,’ but it was priced like there was no landing. Now we're having that disconnect corrected. It’s a long-term positive because it gets us to a sustainable level.
Things were looking better on Tuesday, with the S&P 500 up 1.7%. The Dow was up 460 points, or 1.2%. The Nasdaq Composite was up 1.6%.
DJIA
DJIA (Dow Jones Global)
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