S&P 500 traces out an ugly outside day to start the year. What are the worries?


Heavy selling kicks in

All the positive sentiment in the market evaporated in a few hours. US equity futures were up more than 20 points in the premarket but case is now down by 40, trading an outside day on daily chart.

Heavy selling kicks in

I’m wondering how much that has to do with covid, how much is due to the Georgia runoff and how much is due to flows.

1) Covid

I’ve been watching the UK variant very closely and it’s worrisome, it really is. I think the market wants to see if it causes the same kinds of spikes elsewhere but the data so far is hard to ignore.

2) Georgia runoff

I see this as an asymmetric downside risk for the dollar. The status quo changes nothing but a surprise win for Dems is going to strengthen the fiscal impulse and hurt the dollar while boosting global commodities. I don’t buy into the consensus idea that divided Congesses are better for markets.

3) Flows

That’s the great mystery. Generally though, equity flows on the first day of the year are extremely positive and we’ve seen that elsewhere so I’m inclined to say that’s not a big factor.

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