A Bloodbath or Just a Small Abrasion on the Market's Heel?

The market's bulls were routed during the first trading day of the week, both at the American and the European battlefields. The U.S. S&P 500 broad market index futures initially lost 96 points just one hour before the closing of Monday's session, touching the local bottom, which was 3.65% lower compared with the multi-month high of 4384.38 points on July 14. A lot of comments in the regular media outlets were quick to characterise it as a bloodbath, but an increased dip-buying hyperactivity was born again to raise the quotes above the 4,250 area even before the start of Pacific and Asian hours.
 
Bargain-seeking investors continued to buy and pile almost all beaten down cyclical, financial and big tech stocks on Tuesday, so that the major U.S. index worked back another 1.75%. The Euro Stoxx 50 index was still below the landmark of 4,000 points on Wednesday's European morning, but it also recovered more than 30% of its fall.
 
European gains were seen to be supported by a strong quarterly update from Swiss banking giant UBS (SIX:UBSG), which announced a 63% jump in quarterly net profit to $2 billion vs the same period of 2020. Some other stocks were also seen to climb on the back of the particular corporate news. EasyJet (LON:EZJ) shares added 0.94% on the budget airline's planning to fly 60% of its pre-pandemic capacity already in the July-September period, which could be a large improvement from the 17% in the first quarter. Louis Vuitton Moët Hennessy (PA:LVMH) stocks rose 0.81% after the French luxury group agreed to buy a 60% stake in the streetwear brand Off-White.
 
But it seems like the overall tone changed to a positive side due to the general understanding that the downward inertial motions stopped but still from the very beginning there were no really good-enough reasons for such a sell-off except some instinctive dread of new virus bursts plus normal technical necessity to cool it down because of overheating growth.
 
The market was severely scared by some actual reports released over the  weekend that the U.S. corona cases were up more than 70% last week, as the numbers climbed in all 50 states on Sunday for the fourth day in a row on a rolling seven-day average, with deaths up by 26% . This meant "a rise not seen since the spring 2020 surge", according to Johns Hopkins University data. That's facts, surely, as the daily cases are 44,232 for July 20, four times more than the lows of June, which reached  around 11,000 cases, but the size of the drama is still two sizes smaller compared with the highest daily numbers of more than 85,500 in April, not to mention some winter U.S. national official figures of more than 250,000 cases a day.
 
Mass media is also citing a significant increase in the detected cases in France, with 12,532 cases on Sunday, July 18 and 18,181 on Tuesday, July 20 for now. That's a big burst after less than 2,500 cases per day at the end of June. However, logic says that some growth of infection cases could be natural after lockdowns have been lifted and more people are out and about during the summer months. Those figures are not even approaching the official highest numbers of 57,172 per day for France in April, or 83,324 daily cases which were registered on November 7.
 
Today's fresh pandemic reports may look very convincing in some people's eyes as justification for the health passports saga when the government of Emmanuel Macron tries to implement them widely on a national level not only for bars and theatres but also for trains and planes. In the background of powerful street protests in Paris and many cities of France, massive lines of other people are ready for vaccinations, which may be the main target audience of the Indian strain, bogeyman stories. It is noteworthy, however, to consider that in India itself, the number of new cases of the disease has somehow decreased for the fourth week in a row, showing less than 40,000 cases per day on average now, after more than 130,000 daily cases in early June, and after May's peaks of more than 400,000 cases per day.
 
The question is how did the Indian authorities achieve almost complete emigration of their "native" Indian strain mutation of the virus from the country? Did the Indian strain really go on a tourist trip all over Europe? The fact remains that somehow India managed to contain the spread of a terrible Indian strain in a couple of months, so is there any objective reason to believe that this will not naturally work in the case of Europe or America?
 
The market is a concentration of mainly clever minded people, who are most likely able to analyse the situation from a common sense point of view, at least. So the market is probably able to see threats to the economic recovery, if they would become more realistic, but so far most of the inflation figures, business activity indicators and the labour market indicate a normal progressive movement of the Old World economy, and especially the American economy, upwards, not down. Monetary incentives of financial regulators are also here, and they are likely to be strengthened by statements about the tolerance of the European Central Bank to inflationary surges in the European Central Bank’s new forward guidance after the meeting on Thursday, July 22.
 
So even if recovery is not immediate in the market, and if new failures of stock indices may follow before the end of the week, they probably are going to be quickly redeemed again, and may barely remain so until the end of the month. The leading S&P 500 index would highly likely keep the present heights well above 4,000 points, if not set another all-time record, while the European indexes usually follow the U.S. dynamics step by step, just maybe with some small time lag. Risks are always here but let’s better deal with real infection or macroeconomic figures, not illusive chimeras. What was initially presented as a bloodbath seems to be just a small abrasion on the market's hell, at least for now.