Wall Street’s main indexes slumped on Wednesday, briefly losing more than 3%, as a surge in coronavirus cases dashed hopes of a quick global economic recovery and traders got nervous before next week’s U.S. presidential election. STORY: [.N] [US/] MARKET REACTION: * STOCKS: Dow down 2.93%, S&P 500 down 2.90%, Nasdaq down 3.13% * BONDS: Benchmark 10-year notes US10YT=RR last rose 4/32 in price to yield 0.766%, from 0.778% late on Tuesday. [US/] * FOREX: The dollar index =USD rose 0.31%, with the euro EUR= down 0.41% to $1.1747. [FRX/] * VIX: The VIX .VIX was up 15.8% at 38.6, earlier reaching its highest since mid June above 40 COMMENTS: ANDREW BRENNER, HEAD OF INTERNATIONAL FIXED INCOME, NATALLIANCE SECURITIES “I’ve been saying all along that markets are not prepared for the election. People are just assuming that whether it is a blue wave, a red wave, a blue tide, whatever it is, that markets are going to go up. And they’re now getting a rude awakening. A blue wave would mean a huge increase in capital gains, which means if you’re a wealthy person – the people who have done well this year – you’ve got to sell stuff before year-end in order to avoid an uptick in capital gains taxes next year.” “I don’t think we go much lower than this.” “There have been tremendous outflows from (iShares iBoxx High Yield Corporate Bond ETF) … You’ve seen people exit high yield. That’s causing spreads to widen out…There’s some fear of additional closings in the U.S. and fears that some of the high yield issuers will not be able to pay.” “One of the correlations that still works is lower equity prices leading to wider spreads. And we’ve had three days of falling equity prices so we have wider spreads.” JAY BLUESTINE, FOUNDING AND MANAGING PRINCIPAL, BLUE SQUARE ASSET MANAGEMENT, NEW YORK“It seems to us today’s market is a reaction to what’s going on with COVID cases, an increase in the cases. Obviously this is, along with the election, creating some uncertainty in the market. From our standpoint, we’re not reacting to it.” “With the pandemic and the election being a week away, this type of volatility is anticipated. I would expect the market to maintain a volatile posture. Whether that’s down or choppy depends on the news coming on a day-to-day basis. These 1%, 2%, 3% moves in the market are becoming less of an outside event.” CHRIS ZACCARELLI, CHIEF INVESTMENT OFFICER, INDEPENDENT ADVISOR ALLIANCE, CHARLOTTE, NC “Markets are confronting a perfect storm where you have the realization that both in Europe and in the U.S it’s possible the reopening is going to be halted or slowed down because of the increased virus cases we’re seeing.” “At the same time .... those big tech companies that happen to be in the information technology and communication services sectors are being assaulted on Capitol Hill. There seems to be some bipartisan agreement, which is so rare these days, on the fact the government is going to need to rein in some of these big tech companies.” “Whether you’re in the camp that the reopening is happening and we’re going to get through this which is on the more cyclical side of things or whether you’re in the camp of looking at technology or some of the stay at home names as safety plays for 2020 now it appears there’s nowhere to hide because both types of companies stocks are a little bit under assault right now.” “At the same time the market is finally realizing there’s no stimulus coming before the election and most likely there’s no stimulus coming until at least the next session of congress. So its let’s say 2-3 months where the economy is going to be not supported by additional spending.” “The election is very much on people’s minds. The outcome of the election if its contested provides its own uncertainty. That’s bad for markets. If it does turn out we have a blue wave and we eventually get stimulus that’s all well and good but that’s not immediate. If it does turn out that Trump defies the polls like he did four years ago and win it’s not like Congress is going to be more willing to work with a re-elected President Trump than they are now. It’s a challenging environment.” ERIC KUBY, CHIEF INVESTMENT OFFICER, NORTH STAR INVESTMENT MANAGEMENT CORP., CHICAGO “The market’s resilience has been incredible this year. The fact that every time it keeps holding and pushing to new highs and holding those highs, given what the news has been.” “That’s been built on a three-legged stool. One leg is the Federal Reserve, and everything they are doing on the monetary side. And I think that that’s legitimate and people can continue to count on that.” “But I do think the other two legs are wobbly and I think people are beginning to realize that they are wobbly. And that obviously relates to fiscal stimulus... There was stimulus in the past, there will be stimulus in the future, but it’s just not coming today. And so the expectation that it’s coming quickly has been ill-founded.” “And then obviously the virus is out of control. It’s spiking, it’s bad. The concept that ... it’s going to disappear is just a faulty assumption.” “You put those last two together and yeah the third quarter earnings are really good, but I just think the optimism for the fourth quarter is way overstated, and as people start to come to terms with that, people are going to say maybe the fourth quarter is not going to be what we think it’s going to be.” “What seems to be the increasing likelihood of a ‘Blue Wave’ (in the Nov. 3 election) is something that is going to weigh a little bit on the market as well. As the polls keep shifting that way, I think that that is also something that is in the short run, a headwind.” JOHN PAYNE, SENIOR FUTURES/OPTIONS BROKER, DANIELS TRADING, CHICAGO “When things get scary everybody rushes to the dollar. The currency markets right now are dealing with problems in Europe, and Europe – I don’t know if the market thinks they have a lot of bullets left to fire at this thing. From a quantitative easing standpoint, that’s what is going to come. You see the dollar being more attractive because maybe Trump won’t go in that direction. “Why do you sell stocks? You sell stocks to raise cash, and if anything, the need for cash is now uncertain. Asset prices are elevated. Without another COVID hit to slowdown, what do you need to sell stocks for? There’s really no reason to raise cash. Again, it comes down to who needs money and where do you need money? With no stimulus, rents are due and you got to pay bills. With no money coming in, what do you sell to pay bills?” PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK: “It’s all about the coronavirus, and also there might be some election jitters because there’s a feeling out there that there might be some sort of contested election. But the main factor is the coronavirus and its impact on economic growth. With the possibility of some of the European countries locking down again, that’s a factor.” MATTHEW KEATOR, MANAGING PARTNER, THE KEATOR GROUP, LENOX, MASSACHUSETTS “Investors have pretty much figured we’re not going to see any stimulus before the election and they’re anticipating some additional shutdowns due to spikes in coronavirus cases. Investors are concerned we could see repeat of what we saw in the spring, maybe not at the same magnitude.” “Elections are also part of the investor’s psyche, the uncertainty as to how long it will take to certify election. Investors don’t do well with uncertainty and that’s a cloud hanging over the markets.”