NEW YORK (Reuters) - U.S. stocks fell sharply on Thursday, with the S&P falling 1 percent and the Nasdaq sliding 1.5 percent, hurt by investor nervousness over escalating tensions between the United States and North Korea and lackluster results from retailers Macy’s and Kohl‘s.
JIM STRUGGER, DERIVATIVES STRATEGIST, MKM PARTNERS, STAMFORD, CONNECTICUT
“Overall options hedging activity today is certainly not indicative of panic. There is no way people are going to move swiftly, in this environment that we have had, to throw all sorts of capital at hedges and long volatility exposure. People have been conditioned to not roll out hedges terribly aggressively. Buy the dip has been the mantra.”
DANIEL KATZIVE, HEAD OF FX STRATEGY, NORTH AMERICA, BNP PARIBAS, NEW YORK:
“FX price action looks pretty consistent with weakness in the equity market. The yen is outperforming. The Swiss franc is not doing much today. The other day it was a bit stronger. But we are not really seeing a lot of big movement in most of the crosses other than the yen and yen crosses. The currency tends to do better during periods of elevated risk aversion in the markets.”
GENNADIY GOLDBERG, INTEREST RATE STRATEGY, TD SECURITIES, NEW YORK
“There’s no fresh news about Trump and North Korea and stocks are off more than 1 percent. It’s your typical risk off trade, people taking risk off in stocks and buying Treasuries. Rates are partly being held higher by the upcoming auction.”
JOEL KULINA, SENIOR VP, INSTITUTIONAL CASH EQUITIES (TECH, MEDIA, TELECOM) AT WEDBUSH IN TORONTO, CANADA:
“When you’re looking for new stocks, a lot of these charts are absurd across the board, whether it’s semiconductors or the FANGs. So many of them have gone so far in the past 18 months, what’s going to be the upside from here? The easy money has already been made. I’m looking selectively at the pullbacks, but my gut is that we could be in for a bumpy ride for the next couple of months or so. My gut is that the risk remains to the downside.”
BUCKY HELLWIG, SENIOR VICE PRESIDENT AT BB&T WEALTH MANAGEMENT IN BIRMINGHAM, ALABAMA
“I don’t think it is yet (the start of a correction). I think the important thing to keep in mind is that seasonally August and September historically haven’t been strong months for the stock market... We are at the tail end of ‘sell in May and go away’, so the seasonals are working against us.
”The other thing that we’re seeing is that a very excellent earnings season is coming to an end. So as that is coming to an end we don’t have that as a catalyst for higher prices, we are going to have to wait another 90 days for the next earnings season to roll around.
”You combine those two with some uncertainty with regard to the North Korean situation and it kind of pushes some buyers to the sidelines. I think it’s a combination of those things. I don’t think it’s the start of a major correction or overreaction to North Korea simply because we haven’t seen a cascade of selling... It looks like a pause rather than a correction.”
“I think that (North Korea) maybe put some buyers on the sidelines as opposed to pulling in sellers. I think it’s part of it but it’s under the back drop of a weak seasonal period and the end of the earnings season. If this was two weeks ago we might not see this type of move.”
“The thing to keep in mind is the fundamentals are still very strong and the earnings recession is in the rear-view mirror... I don’t think there is a lot of downside here based on fundamentals. But if we have some type of world event there could be a short term selloff.”
JIM PAULSEN, CHIEF INVESTMENT STRATEGIST AT THE LEUTHOLD GROUP IN MINNEAPOLIS
“A pullback is good so the market doesn’t get unidirectional. This is a normal fluctuation, it just seems so odd because we have hardly had any volatility.”
“We’re right about the 1 percent area (on the S&P 500), it wouldn’t be so outstanding except we haven’t had many. This is now, but we’ll see where it ends. If we fall further maybe it creates a little more fear for a few weeks.”
“If it does go lower it’s a good buying opportunity. I’d look into energy, materials, industrials, tech and financials. I think before the end of the year the market goes to new highs and (Treasury) yields go higher.”
“The dollar is off again today despite the global turmoil. Not even a geopolitical crisis is enough to give it a bid.”
PETER KENNY, SENIOR MARKET STRATEGIST AT GLOBAL MARKETS ADVISORY GROUP IN NEW YORK
“Markets are looking for any reason at all for a reset. That reset is being triggered by North Korea geopolitical concern and stretched valuations. This inflation data for the month was not good. Wall Street was expecting more inflation. And all of that is against a backdrop of nobody on their trading desks ... Every August we have some reason to run up the alarm.”
“Is this the beginning of a correction, no. Is it the beginning of a pullback, yes. I do think we could see markets pull back between 1 and 5 percent. That would be the result of nothing more than some valuation compression.”
ROBERT PAVLIK, CHIEF MARKET STRATEGIST, BOSTON PRIVATE WEALTH, NEW YORK:
”It remains to be seen,“ if it’s the start of a bigger move down. ”You have to watch where it closes today. People will probably keep their eye on 2,448 - the 50-day moving average - and then 2,411. We have to get through these next few days with the political tensions. You’ll probably see a bit of selling pressure as we move forward.
”We’re not very oversold yet so the market still has more downside left to it. What we’re seeing today is political tensions over North Korea and the United States... making people nervous.
”We’re still close to the all-time high so that makes people a little nervous too, so they might say now might be the time to take a little bit of money off the table.
“Also people may be on vacation and might not be watching the market as closely.”
JEAN BOIVIN, HEAD OF ECONOMIC AND MARKETS RESEARCH, BLACKROCK INC‘S (BLK.N) INVESTMENT INSTITUTE, NEW YORK
“I don’t think this is the start of a change in (low volatility) regime. The key thing is these regimes tend to be very persistent and there needs to be more fundamental questioning of the underlying track of the economy so that sentiment is undermined.”
“It’s one of these triggers that leads people to reassess. There’s been an uninterrupted run in risk assets.”
Americas Economics and Markets Desk; +1-646 223-6300