Sep 20 2021 (Mon)
The equity markets experienced a sell-off on September 20 after it was revealed that China’s real-estate heavyweight Evergrande will miss its interest payments due this week, making investors nervous given the company’s mountain of debt that stands at $300 billion.
The S&P 500 fell by 1.7% while the NASDAQ Composite and Dow Jones indices also lost 2.2% and 1.8% respectively. The top losers on the S&P 500 included:
Invesco Limited down 8.7%
Nucor Corp. down 7.6%
APA Corp. down 6.1%
In an interview with Yahoo Finance, David Bahnsen, chief investment officer of The Bahnsen Group explained, “While the Evergrande situation is front and center, the reality is, stock market valuations are overstretched and the market has enjoyed too long of a break from volatility and Monday's stock market declines are not surprising.
The Democrats are likely to suspend the $28.5 trillion debt ceiling which also increases the government’s borrowing limit. According to U.S. Treasury Secretary Janet Yellen, in case the federal government does not go ahead with the suspension, there is a good chance for them to default on interest payments resulting in a worldwide economic meltdown.
The U.S. will be able to borrow money after suspending the debt ceiling allowing the government to maintain spending on programs such as Medicaid. The debt ceiling was introduced during the first World War and has since been suspended several times..
Investors should note that the ceiling does not account for any new spending but relates to those already authorized by Congress such as Social Security payouts.
The Fed Reserve is meeting on Wednesday and markets will be on the lookout for any hint that gives an idea of their asset tapering timeline.
It’s a light economic calendar but there are a lot of housing numbers coming out this week. Existing home sales numbers will be out on Wednesday while new home sale numbers will be out on Friday.
Several large-cap companies are scheduled to report their earnings this week including Nike, FedEx, General Mills, and Costco. Nike shares have taken a beating recently as it grapples with supply chain problems. But NKE stock still returned over 11% year to date and has gained close to 40% in the last 12-months.
In the last 72 hours, stocks such as SmileDirectClub, IronNet, and The Metals Company or TMC gained popularity on social media platform Reddit.
SmileDirectClub recently announced the company will introduce its premium clear aligners, telehealth platform, and whitening system at its France SmileShop in Paris. SmileDirectClub is rapidly expanding in Europe with a strong focus on providing accessible and affordable oral care products.
IronNet reported its quarterly results last week and ended the fiscal second quarter of 2022 with annual recurring revenue of $24.1 million, up from $19.5 million in the year-ago period. It ended Q2 with a customer base of 51, up from 22 in the prior-year period. However, IronNet’s revenue fell to $6.1 million, from $7.9 million while operating loss widened to $17 million, from $14.2 million.
TMC stock is fell 14.2% on September 20 and is down another 13% in post-market trading. The Metals Company went public on September 10 this year via a SPAC. But soon after the public issue, several investors backed out of funding, resulting in a low float ratio. Stocks that have a low float are exposed to manipulation by market participants.