Monday was the worst day of the year on Wall Street, as the Dow dropped 700 points, its biggest drop since last October.
The Dow Jones Industrial Average dropped 725.81 points, or 2.1 percent, while the Nasdaq dropped 1.1 percent and the S&P 500 fell 1.6 percent.
“The market appears ready to take on a more defensive character as we experience a meaningful deceleration in earnings and economic growth,” Morgan Stanley chief U.S. equity strategist Mike Wilson said in a note Monday as cited by CNBC. “Market breadth has been deteriorating for months and is just another confirmation of the mid-cycle transition, in our view. It usually ends with a material (10-20%) index level correction.”
The Associated Press also attributed the drop to resurgent coronavirus fears.
“The more transmissible delta variant is delaying the recovery for the ASEAN economies and pushing them further into the doldrums,” Venkateswaran Lavanya, at Mizuho Bank in Singapore, told the AP.
In addition to the Delta variant, a MarketWatch report attributed the drop to growing U.S.-China tensions.
“The delta variant is getting a lot of attention right now as an explanation for weakness,” Sahak Manuelian, head of equity trading at Wedbush Securities in Los Angeles, told that site. “Another good reason is really peak everything: peak valuations, peak growth… add in the delta variant and you have a decent case for why stocks are lower.
“But the third thing, which might be the most troubling, is U.S.-China relations. They are certainly getting worse.” The Biden Administration, also on Monday, publicly blamed China for this year’s Microsoft Exchange hack.
Seeking Alpha’s Clem Chambers went on to predict a crash, and state that he’s getting out of the market.
“I’m calling a crash because of a long tortuous trail of research starting with the fact my portfolio was getting pummeled while the index wasn’t. This is the starting point,” the piece by Chambers said. He blamed it on two things, Delta Covid and QE tapering.
“Now I used this technique to call Bitcoin up and trade the top and many will think this idea has no value. Yet in my experience when markets bubble, or for that matter crash, they do so because they are broken by some new factor. The Fed broke the markets to the upside by its QE innovations, but at some point, the music has to stop. For me, now looks like a strong candidate for that and I’m out,” he wrote.
Stephen Silver, a technology writer for The National Interest, is a journalist, essayist and film critic, who is also a contributor to The Philadelphia Inquirer, Philly Voice, Philadelphia Weekly, the Jewish Telegraphic Agency, Living Life Fearless, Backstage magazine, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. Follow him on Twitter at @StephenSilver.