Which way do we go from here?
That’s what the market is trying to figure out this morning after opening for a big loss and then recovering shortly before noon. The Dow even traded for a gain at one point, but ultimately dipped slightly lower. The S&P and Nasdaq Composite endured deeper losses.
Tech stocks continued to fall, too, as Facebook (NASDAQ: FB), Amazon (NASDAQ: AMZN), Google-parent Alphabet (NASDAQ: GOOG), Apple (NASDAQ: AAPL), and Microsoft (NASDAQ: MSFT) all dropped more than 1%.
Even Snowflake (NYSE: SNOW), which saw its IPO price double yesterday in a stunning debut, plunged. SNOW shares are currently down 9%.
Energy stocks, on the other hand, surged as crude oil prices recovered. The United States Oil Fund (NYSE: USO) climbed as much as 2.40% higher today. It’s up roughly 11% from the low of September 8th when WTI crude futures suddenly dipped.
The market’s response this morning comes as somewhat of a surprise following the Fed’s remarks on interest rates yesterday. The FOMC announced that rates would stay low for the foreseeable future, which should keep equities “juiced” for at least a little while longer.
Fed Chairman Jerome Powell dashed much of the optimism surrounding the announcement, however, when he stated that the U.S. was falling behind in its economic recovery. Sluggish employment growth and missed GDP estimates remain as downside risks to the FOMC.
Powell then shifted to the topic of stimulus, as he pressed lawmakers to pass a bill.
Want more FREE research and analysis on the best “unseen opportunities” in the markets?
“My sense is that more fiscal support is likely to be needed,” he said.
“Of course, the details of that are for Congress, not for the Fed. But I would just say there are roughly 11 million people still out of work due to the pandemic and a good part of those people were working in industries that are likely to struggle. Those people may need additional support as they try to find their way through what will be a difficult time for them.”
Powell then doubled down on his comments, adding that many other economists share his viewpoint.
“I would say the fiscal support has been essential in the good progress we see now and finally I’ll note just about all — the overwhelming majority — of private forecasters who project an ongoing recovery are assuming there will be substantial additional fiscal support,” he explained.
To CNBC’s Jim Cramer, a potential stimulus deal is enticing enough to remain long on equities.
“If we get a stimulus package and you’re out of the market, you will feel awful,” Cramer said this morning.
“I do feel the stimulus package is very hard to get, but if we do get it, you can’t be out of this market.”
For the time being, Cramer’s right – the major sell-off that so many bulls are afraid of has yet to arrive. The indexes are still trading above their monthly lows from last Friday.
Bargain-hunting investors have shown that they’re more than willing to “buy the dip.” And if a stimulus bill eventually happens, they’ll be glad they did.
Even if that means dealing with more gut-wrenching volatility and choppiness before the next leg up.