Between the fiscal stimulus deal agreed over the weekend, and the first day of Tesla trading in the S&P (where for every $11.11 dollar move in TSLA stock, the S&P changes 1 point), there was some hope that futures would be even higher record-er today… and they were for about 10 seconds after they reopened for trading at 6pm on Sunday when the Emini briefly spiked to 3,724 just after Senate majority leader Mitch McConnell confirmed congressional leaders had agreed a roughly $900 billion COVID-19 relief bill.
It wasn’t meant to be, however, and just a few hours later, S&P futs had plunged as much as 125 points, or down 2.5%, sliding briefly below 3,600 before rebounding modestly to 3,640 with risk assets were crushed as markets digested newsflow that focused on virus mutations in the UK which sparked a new round of UK lockdowns (as well as a panicked attempt by Londonders to flee), coupled with continued lack of clear progress on Brexit.
Oil & gas, banks and auto names drop over 4% and are the worst hit sectors in a sea of red, with oil tumbling in response to fresh airline travel fears while the dollar soared and VIX exploded 40% (!) rising above 30 after trading near 20 last week.
What sparked the panic were reports of a fast-spreading new coronavirus strain in Britain which threatened to torpedo markets’ optimism over a vaccine-fuelled rebound in economic growth. The strain, said to be up to 70% more transmissible than the original, has put some 16 million Britons under tougher lockdowns and prompted several countries to shut their borders to the UK, effectively overshadowing positive U.S. news on a much-needed stimulus bill. The shutdown of international travel and the flow of freight in and out of Britain threatens chaos for British households and businesses, and sent oil prices plummeting as traders feared demand for oil would plunge as a result of the latest lockdowns.