November 10, 2020 | Stocks Finally Bend to the Weight of News

Tech stocks hit a wall Tuesday, unable to remain afloat on a tide of stressful news. Although Wall Street would have us believe investors shouldn’t care who wins the election, the idea is preposterous. There is simply no way that a takeover of Capitol Hill by the Democrats could be perceived as good for business and the economy. But there’s a Catch-22 if Trump succeeds, since a court decision paving the way for a second term could gravely unsettle America for years to come.
A vaccine remains a bullish wild card, as the mindless herd demonstrated on Monday. Pfizer announced a drug that supposedly has been 90% effective in trials, touching off the most powerful one-day rally in stock-market history. The clinical basis for the drug maker’s claim went largely unexplored at first, presumably because the stock market’s canny masters had every reason to avoid hard questions that might queer the celebratory mood . But doubts surfaced on Tuesday nonetheless, causing shares to extend Monday’s retreat, with big tech leading the way.
The weakness seems likely to continue until after the election is settled, which could take as long as two months. Small-cap stocks may be raring to go because that is the ‘story’ the stock market’s masters have been hyping non-stop, but they cannot get very far with the FAANGs and other insanely overbought lockdown winners weighing them down. Conclusive news of a truly effective vaccine could goose stocks at any time of day or night. However, even a truly miraculous vaccine would not suffice to justify the sensational earnings multiples achieved by many stocks after the lockdown. It is as clear a case of “buy the rumor, sell the news” as a trader could ask for.
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Rick Ackerman November 10th, 2020
Posted In: Rick's Picks
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