Trump No More Effective Than Powell in Stanching Stock Bleeding

(Bloomberg) -- Markets are angry again, and it will take more than a few tweets to placate them. If you take one message from Wednesday’s sell-off, make it that: once volatility gets revved up like it has, no single human voice is likely to calm it back down.

Consider that the S&P 500 has swung more than 1% now for 11 straight days, a cluster of chutes and ladders not seen since the December rout. The trade outlook improves, and the Dow jumps 370 points. The yield curve inverts, and it falls more than twice that. All month long, an incessant back-and-forth has dominated.

“This is different because fundamentals are taking over. Slower growth and lower earnings,” said Donald Selkin, chief market strategist at Newbridge Securities Corp. “There are too many negatives at this point. What Trump is saying and what the Fed is saying is no longer enough. Growth is slowing, what can you do about that? There’s not much you can do.”

All told, after the S&P 500’s rally on trade optimism, Wednesday delivered a 4.4 percentage-point swing over two days, the biggest positive to negative reversal since March 2018, data compiled by Bloomberg show. A flurry of tweets by Trump implicating Powell in the carnage couldn’t stem the losses Wednesday.

Here are a few charts that show the heat facing markets:

Looking For Support

All 30 members of the Dow Jones Industrial Average fell, driving the benchmark below its 200-day moving average for a third time this month. The index had its lowest close since June.

The S&P 500 fell below 2,850, a key level watched by chartists. Should the rout persist and the index break 2,822, its intraday low on Aug. 5, the next threshold under threat is its 200-day moving average, currently around 2,795.

Forceful Fall

Traders were forceful and unforgiving with their stock selling. For the second time in eight sessions, more than 90% of volume on the New York Stock Exchange was for stocks trading in the red. The last time trading volume of falling securities spiked to 90% for two out of 10 sessions was in April 2018, data compiled by Bloomberg show.

Divided Market

Strategists continue to warn that a divided market cannot stand strong. Sundial Research’s Jason Goepfert highlighted Monday that a breadth indicator was pointing to a “historically split market,” as multiple stocks jumped to new 52-week highs while others sunk to 52-week lows.

Doug Ramsey, chief investment officer of Leuthold Weeden Capital Management, issued a similar warning Wednesday, writing in a note to clients that “the Advance/Decline work continues to disguise a very dangerous, underlying bifurcation of the market.”

Volatility Returns

Wall Street’s fear gauge, the VIX, punched above 20 Wednesday for the fourth time in August’s 10 trading sessions. Rising as high as 22.7, the index sits comfortably above this year’s average of 15.8.

With the S&P 500 down more than 2%, Wednesday marked the 11th straight day that the benchmark notched an intraday move of greater than 1%.

The Most Damage

Financial and energy companies led Wednesday’s slump as traders dumped shares whose earnings are seen most sensitive to economic growth. Down 12% from its July peak, the KBW Bank Index is mired in its biggest retreat since December.

Energy producers, already the worst performer among major S&P 500 industries, wiped out their 2019 gains. After falling in 12 of the past 15 days, the industry gauge is now down more than 1% for the year.

Cyclicals Slide

With an inverted yield curve stoking fears of recession, Wednesday’s sell-off sent a Goldman Sachs basket of economically-sensitive stocks down as much as 3.5%, more than a percent worse than its more defensive counterpart. That pushed a ratio of cyclical stocks versus their safer peers to the lowest in three years.

To contact the reporters on this story: Sarah Ponczek in New York at sponczek2@bloomberg.net;Elena Popina in New York at epopina@bloomberg.net;Lu Wang in New York at lwang8@bloomberg.net

To contact the editor responsible for this story: Jeremy Herron at jherron8@bloomberg.net

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