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Sell the day and go away? U.S. stock returns come overnight

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09/28/2020 | 02:58am EDT
Traders wearing masks work, on the first day of in person trading since the closure during the outbreak of the coronavirus disease (COVID-19) on the floor at the NYSE in New York

Mornings have been lacking in joy this month for investors seeking returns in U.S. stocks.

So far in September, regular-hours trading has featured consistent selling, according to data from Bespoke Investment Group. On average, losses on the benchmark S&P 500 have been steepest between 10 a.m. and 11 a.m. Eastern (1400-1500 GMT), and every hour thereafter during the session has registered declines.

Overall, the S&P 500 has registered losses for four straight weeks, its longest such streak in a year.

"Besides some ever so modest gains in the opening half-hour, the rest of the day consists of investors hitting bids and unloading stocks," Bespoke's strategists wrote in a note on Friday.

September's activity returned U.S. stocks closer to their long-term trend of outperforming in after-hours trading versus regular-session trading, in contrast with most of 2020, when they outperformed during the regular session.

Since the SPDR S&P 500 ETF Trust, which tracks the S&P 500, launched in 1993, it has posted a 722% return in after-hours trading but an 8.5% loss in trading during the regular session, according to Bespoke.

However, geopolitical and macroeconomic developments have led to after-hours underperformance in several recent instances, said Christopher Murphy, co-head of derivatives strategy at Susquehanna Financial Group. One such period was in spring 2019, when U.S.-China trade tensions reached a peak. In February this year, after-hours returns fell as concerns about the coronavirus pandemic focused largely on Asia, where trading begins after U.S. trading ends.

"A lot of the market-moving stuff is happening after hours, and that's generally why you see the market rallying overnight," Murphy said. "When there's an outside-U.S. shock ... those are the few times we see overnight underperformance."

After-hours underperformance may not last much longer, however, given recent activity.

"After dipping way in the hole earlier in the year," after-hours performance is "getting closer and closer to taking the lead in 2020 as well," Bespoke's strategists wrote last week.

(GRAPHIC - S&P 500 regular session v after hours return:

)

By Caroline Valetkevitch and April Joyner


Stocks mentioned in the article
ChangeLast1st jan.
DJ INDUSTRIAL -0.35% 28210.82 Delayed Quote.-0.80%
NASDAQ 100 -0.11% 11665.365595 Delayed Quote.33.22%
NASDAQ COMP. -0.28% 11484.694182 Delayed Quote.28.35%
S&P 500 -0.22% 3435.56 Delayed Quote.6.07%
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