The market caught a base case of the coronavirus on Friday on a big outside reversal day to the downside for the NASDAQ Composite Index on heavy and higher volume. The S&P 500 also posted an outside reversal to the downside while the Dow held up only marginally better.
While the news-swirl regarding the coronavirus provided the alibi for Friday’s selling, the bottom line is that the market and leading stocks were well-extended already. A pullback was therefore not out of the realm of possibilities, and all the major market indexes were down less than 1%.
From that perspective, the selling wasn’t that bad, but within the context of the action among individual stocks it was not constructive. Investors should be alert to further downside this coming week. But the action will likely be colored by how earnings play out for a slew of big-stock names that are reporting this week, so the situation will be very fluid.
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