So much for that record high. One day after setting another all-time high, the S&P 500 Index (^GSPC -0.13%) is in a rout, down 3.1%, or more than 100 points, just before 1 p.m. EDT on Sept. 3. In a typical year, a 3% move down would likely go down as the worst day of the year. But 2020 has been anything but typical with the economy struggling to bounce back under the weight of the coronavirus pandemic that still has tens of millions of Americans out of work or working less than they want.
Today's sell-off is broad and deep with the majority of stocks in every sector down, and only one notable group of stocks -- cruise stocks -- in the index up on the day. Starting at the top of the index, the megacaps Apple (AAPL -0.53%), Amazon.com Inc (AMZN -1.04%), Microsoft (MSFT -1.64%), Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL), and Facebook (NASDAQ: FB), with a market cap of more than $800 billion are all down more than 4.5%. Apple in particular is down sharply, with the $2.25 trillion company's shares down almost 7%.
Image source: Getty Images.
Broad flight from stocks, but tech is driving the momentum lower
It's a broad sell-off. At last count, more than 430 of the 505 stocks in the S&P 500 were down, and almost 200 of those were down close to or more than 3%.
It's not uncommon to see "safer" sectors like utilities and real estate move higher on big down days for the broader market, as investors move from the perceived risk of growth and tech but still want to remain exposed to the liquidity of stocks. That doesn't seem to be the case today. The majority of both real estate investment trusts (REITs) and utility stocks are down, just like with every other sector.
The tech and telecom sector is indeed leading the charge to the exits, with 96 of the 97 stocks in those sectors down today and more than 80 of those down at least 1%.
Cruise stocks up on Carnival's plans to sail
Cruise stocks are proving the exception to this exceptionally painful day for many investors. Carnival (CCL 1.17%) shares are the best-performing in the index today, up almost 7% at this writing, followed closely by Norwegian Cruise Line Holdings (NYSE: NCLH), up 6.5%, on news that Carnival was set to return to the seas in September and November. Royal Caribbean (NYSE: RCL) shares are up 5% as well.
Carnival announced that two of its smaller brands, Costa and AIDA Cruises, would resume very limited cruising soon. Costa will begin sailing from Italy -- with only Italians being allowed to board -- on Sept. 6, while AIDA Cruises will resume cruises from the Canary Islands in November, with plans to expand operations in two other locations in December.
Investors are clearly betting big that Carnival's resumption of service in these markets will lead to U.S. regulators giving it approval to set sail from U.S. ports soon. The entire industry remains under a CDC "no sail" order. However, it may not happen so quickly: The U.S. continues to "lead" the world in COVID-19 cases, and barring a continued decline in cases, health officials may not be so quick to allow the industry to resume operations before a vaccine and/or more effective medical treatments are widely available.
What investors should know right now: Be ready to act
Whether today's sell-off turns into a second bear market this year or gets erased from our memories if stocks go up tomorrow remains to be seen. But even with today's big decline factored in, the S&P 500 is still in record territory. Moreover, most of the tech stocks that have fallen the hardest today are still well above the prices where they began 2020.
AMZN Total Return Price data by YCharts
What does that tell us about what to expect tomorrow, or next week, or next month? Nothing useful; the historical data say what happens next is a coin toss. The reality is, there is no reliably consistent way to predict what stocks will do in the short term. But in the long term, stocks continue to be the best tool to build wealth.
Another market crash is coming, we just don't know when. But that doesn't mean there's nothing you can do to be ready. The best action investors can take right now is make sure they have a plan to act when it does happen.
