Bulls Lose Nerve and Another Rally Crumbles on a Volatile Monday

(Bloomberg) -- Mondays have been notable for their stock volatility lately and though it was hard to tell at the close, this one was the same.

After rallying as much as 1.8 percent through the first four hours and threatening to wipe out last week’s decline, the S&P 500 rolled over at 2 p.m., erasing about two-thirds of its earlier advance. At the end of the day, the benchmark measure was up 0.3 percent.

The cascade of selling coincided with news that the FBI conducted a raid at the office of President Donald Trump’s longtime lawyer, Michael Cohen, who has been a key figure in several legal issues including the investigations into Russian election meddling and a payment to an adult film actress.

Swings like these are nothing new for traders coping with headlines on global trade. Earlier today, stocks rallied as investors shifted attention to what’s forecast to be the best earnings season since 2011 while speculation grew that China’s Xi Jinping may seek to calm a trade dispute with the U.S. during a speech later this week.

Below is a sampling of what strategists and analysts say about the stock market.

Michael Purves, chief global strategist at Weeden & Co.

“The most palpable market risk from the FBI invasion would be a higher chance of Republicans losing House and potentially losing some Senate seats (though right now the latter looks like a big ask). This would suggest more like a putting on the brakes of a furtherance of some pro–growth Trump initiatives.”

“The initial headline and the market reaction was ugly, but it is not clear what this really means for the market or the economy, if anything. A path to impeachment is tough and ultimately requires the Democrats to get the House and for Republicans in the Senate to truly distance themselves from Trump, something they have failed to do thus far. Trump’s approval ratings have been climbing despite the rise of news flow surrounding Stormy Daniels etc."

Matt Maley, a strategist at Miller Tabak

“You have the market uncertainty over China and trade tariffs, you have Zuckerberg testifying, you have the leader of China speaking, and now you have the uncertainty over Cohen - and it is not normal to have all of these issues being totally ignored. U.S. Stocks can handle one or two uncertainties, but now there are just too many things to worry about. Normally you would see investors using the market weakness to add more before the earnings season kicks in. This is not happening because of all the uncertainty. Investors are in a ‘show me’ stance when it comes to earnings, until they see the earnings, they don’t want to risk.”

Peter Boockvar, chief investment officer at Bleakley Financial Group LLC.

He said he didn’t see any specific news that precipitated the selloff in the final hours of trading, “but I also didn’t see any specific news for the rally” earlier.

“This shows that rallies now are seen as selling opportunities.”

Peter Cecchini, global chief market strategist at Cantor Fitzgerald

“Market advanced hard in the morning and took a breather in afternoon as markets rarely go styright up or straight down. Then the Cohen news hit. Sometimes there just no direct attribution for market moves. Sentiment is slowly shifting and the volatility is a product of that. Expectations are simply too higher, whether it comes to global economy or upcoming earnings.”

John Stoltzfus, chief investment strategist at Oppenheimer Asset Management

“This market since 2009 always looks for a catalyst to justify profit taking -- regardless if it’s taking short or long term profits. As this doesn’t sound like something which could prove damaging to the fundamentals (economic and corporate) that are driving this market nor something that might create systemic risk, we’ll take pause and seek details before jumping to conclusions or projecting negatively about this news item on the market.”

Barry Bannister, chief equity strategist at Stifel Nicolaus

“Sordid Special Counsel pursuit of a presidential dalliance with a White House intern in 1998 is no more relevant than payments to porn actresses by pre-presidential businessmen in 2018. The world has moved forward 20 years, but legal eagles in the government have remained thoroughly retrograde. That may be fodder for fanatics on both sides in 1998 (then) and 2018 (now), but I think true investors are more focused on trade, dollar liquidity and credit as the big three issues. And those are weighty issues indeed.”

--With assistance from Joanna Ossinger

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

To contact the editor responsible for this story: Arie Shapira at ashapira3@bloomberg.net.

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