Yesterday brought widespread carnage to the markets; even the Dow, which had been holding up well, closed down more than 800 points. Tech stocks were the hardest hit, but the selling spread to almost every other sector, including energy stocks, utilities and financials.
And markets are lower again today, although some tech stocks have found support.
Some investors are bracing for even more declines, as evidenced by an uptick in hedging. However, the market’s longer-term trend is still up, and there’s no evidence to suggest that this is anything other than a sharp, short shakeout—yet.
In fact, in some ways, this pullback looks like the short-lived correction we experienced in February, which also coincided with a significant increase in interest rates. For the record, that correction lasted about two weeks, and the S&P 500 fell almost 10%. The index did chop around for the next few months, but regained the losses by early August.
So for now, we’re just watching and waiting. On an individual stock level, sharp one-day selloffs are often fixed quickly, and it doesn’t pay to act rashly. However, here are a few names I do want to comment on, listed below. And in general, be very cautious about buying here, until we get more clarity on the market’s next move.
AllianceBernstein (AB) moves to Hold
AB crashed through its 50-day line yesterday as financials tanked. Making matters worse, AllianceBernstein chose yesterday to announce that assets under management declined slightly in September due to worse fixed income performance. However, the selloff occurred on normal volume, so I don’t think there’s any reason to panic. AB is still above its 200-day line, and the stock experienced a similar-looking (so far) three-day plunge in early August, but quickly recovered. Still, given the conditions in the market, I’ll move AB to Hold today out of an abundance of caution.
CSX Corp. (CSX) moves to Hold
I’m going to move CSX to Hold today as well. CSX also plunged through its 50-day line yesterday, dropping about 7%. The plunge mirrored a similar decline in other transport stocks. The drop has brought our loss in CSX, our second-newest position, to 7%, but buyers stepped in today, and the stock hasn’t fallen further. Hold.
Occidental Petroleum (OXY) still on Hold
Yesterday’s selling brought OXY down to its 200-day moving average, which could actually be a good buying opportunity if the sellers tire themselves out soon. OXY found support at the 200-day back in mid-September, and energy stocks were just starting to get their groove back before this week’s panic. Hold.