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Rare Black Friday Losses

11-26-2021

Well, as everyone now knows, angst over the Nu Covid variant precipitated a tremendous amount of motion across all markets. However, I would make the point that the U.S. stock market was just waiting for a catalyst to decline, as it has been sort of running on fumes for many months now. The question is, can it feed on itself to the downside and lose a lot of ground in a short space of time? I believe structurally that's possible, so we'll just have to see how it develops.

Nu News is Bad News In any case, it took all of about 90 minutes for the market to fall 2%, plus or minus, depending on the index. The only areas of real strength were some of the previous lockdown stocks, although I doubt that some of those stocks that "won" in the first round of Covid will do as well, regardless of what happens next.

From there, the market weakened a little more, losing 3.5% or so in the session. I suppose some people were thankful that we closed three hours early. Nonetheless, one reason I had planned to write a column today (when I usually don't) is because I thought there was potential for disappointment, as I alluded to earlier in the week, which might be meaningful. I had no idea, however, what the catalyst might be and despite today's damage I don't think we'll really have a sense of how the market/economic scenario will "play out" over the next couple of months until we see a few more days of trading.

Away from stocks, fixed income screamed higher and green paper was weaker. It will be interesting to see how people handicap the potential for the Fed to err on the side of easiness even with inflation as it is. I'm pretty sure the belief that the Fed was going to get tough was part of what was dragging the dollar higher, but I don't want to draw too many conclusions on a thinnish semi-holiday Friday.

Recent Transactions Still Not Settled Turning to the metals, they were mixed, with gold up 1.5% at one point overnight before that gain was turned into a 0.5% loss in a late-morning line job. From there, gold rallied again to finish about flat. Silver was lower all day (closing down 2%), as were most commodities (oil lost 11.5%), as the crosscurrents of inflation, demand, and positioning all battled it out. The miners were weaker.