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Dow falls by over 500 points amid September selling. What three market analysts see ahead

So much for a September surge.

Stocks fell Monday as renewed concerns around the coronavirus pandemic and a still-unclear future for federal stimulus weighed on investors’ optimism. The Dow Jones Industrial Average lost more than 500 points, tracking for its biggest daily plunge since June, while the S&P 500 saw its worst one-day performance in almost two weeks.

Some market watchers saw the action as an opportunity.

Here’s what they told CNBC in the midst of Monday’s selling:

Barry Knapp, managing partner at Ironsides Macroeconomics, pointed out that the S&P’s 7% decline from its early September peak has been led by Big Tech:

The benchmark’s drop has “been dominated by the consumer discretionary sector, which, of course, is 25% Amazon, information technology and communication services. And so, it’s really been the mega-cap, winner-take-most companies that have taken the market down. Industrials, materials and financials are flat during that time period. So, for me, this represents an opportunity. We thought there would be a pullback around this time frame. There’s all sorts of risks. I didn’t expect it to be all about TikTok, WeChat. … On [Monday] morning’s weakness, I would definitely be a buyer of those cyclical sectors. If you want to buy [the] S&P down 9.5%, it’s probably a pretty good spot as well. But I would be buying.”

Mohamed El-Erian, Allianz’s chief economic advisor, said investors shouldn’t forget the Fed:

“What the market is looking for, for this to be a ‘healthy correction’ as opposed to something less constructive, is for the handoff to occur, for the rally to broaden, for banks, for lagging sectors, to catch up. And if you put a question mark over one of these sectors, it just means it’s a tougher road ahead. For what everybody wants is they want the rally to continue, but be a lot broader than what we have seen so far. … I worry a lot more that for a long time … we have been powered by liquidity, by technicals, by liquidity conditions. We have decoupled from fundamentals a long time ago. So, fundamentals would not get the laggards to catch up, and you’re seeing this in the banks [on Monday]. There’s going to be this falling in love again with the liquidity conditioning. That’s what you need if you buy into this market at this stage and that is all a conditioning issue. And I think what happened last Wednesday may end up being a lot more consequential than a lot of people realize right now, because the market should have gone up and stayed up because the Fed surprised by being more dovish in its guidance than people expected.”

Jeffery Harte, managing director and senior research analyst at Piper Sandler, figured bank stocks would struggle for a bit longer:

“What we’re … seeing here is banks kind of hitting the lower end of their recent trading range. It’s going to be tough for them to break out of that trading range until things look better as far as the outlook becomes a little more clear. So, to give you something good, though, I do think when you look at a JPMorgan or a [Bank of America] down [Monday], it’s a buying opportunity. … You’ve got to be a little bit of a selective investor, I think. … The JPMorgans and the BofAs of the world are the place to be.”


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