The Friday selloff sparked by a huge op-ex expiration which saw up to a third of market gamma rolling off, has accelerated on Monday morning with the narrative goalseeking today’s rout to concerns that the covid resurgence and elevated inflation will weigh on global demand. At 730 a.m. ET, Dow E-minis were down 357 points, or 1.02%, S&P 500 e-minis were down 48 points, or 1.12%, and Nasdaq 100 e-minis were down 91 points, or 0.63%. The rally in Treasuries continued, sending 10-year yields tumbling below 1.23%. The dollar strengthened, oil dropped and gold and bitcoin was also lower.
“The peak of economic growth rates is behind us and growth worries are back. The good news is that even if the peak of some economic indicators is behind us, equities should continue to perform positively in the medium term in a positive economic environment,” Berenberg strategists said in a note. “However, high valuations, COVID-19 fears, low trading volumes over the summer and high investor equity allocations argue against significantly rising markets for the time being.”
In a flashback to 2020, traders are once again freaking out about Covid as New cases surged 70% last week compared with the prior seven days to an average of 30,000 new infections a day, fueled by the Delta variant. Deaths rose 26% week-over-week to an average of 250 lives lost a day, mostly in unvaccinated patients.