It was a gnarly risk-off overnight session with the S&P down 1.2% in the US and more significant losses in Europe.

Indeed it seems that the market fell out of bed as traders rolled out of bed to a nasty realisation the virus spreads faster with the arrival of cold weather in the northern hemisphere.

But it was a fascinating US session. Retail and systematic selling pressured the market out of the gates in NY, but the steady buy skews on a plethora of value, financials, and industrials were trying to paint the ticker green.

There were odd cross-currents, and I do not think there is one particular factor driving the action overnight.

Election and year-end positioning do mean something. But with the ‘At home” basket outperforming, I think the fear of renewed lockdowns was the largest factor yesterday as the Covid-19 headlines appeared to scare the bejeebers out of just about everyone.

Price action was very orderly, although any uptick in futures was getting sold overnight with the broader market feeling very heavy. The trade over the last number of months has been to buy dips.

But the likelihood is that yesterday pullback has a little more to run, especially as weaker hands get shaken out of some of the more crowded cyclical areas of the market.

But is it time to rebuy the dip?? Who am I to argue as, by the looks of the S&P 500 rebound, it certainly appears like the theory is standing the test of time once again?

Lockdown concerns in Europe

In Europe, concerns about renewed lockdowns took centre stage. Amid rising infections, another step towards tighter restrictions in the UK is expected as early as today, with reports suggesting UK PM Boris Johnson is expected to announce an early 10 pm closing time for pubs.

Sure, closing pubs earlier than usual is a terrible thing but hardly a national lockdown scare. Suggesting UK policymakers are reluctant to reintroduce national lockdowns, and even regional constraints can significantly impact spending.

Another derailment in US fiscal stimulus

The chances of a fiscal stimulus package ahead of the election have likely been derailed by the Supreme Court vacancy in the US.

There is no one reason for the weakness.

However, the rising case count in Europe and concern that the summer recovery is probably as good as it gets when it comes to the rebound in economic activity weighs on cyclicals. News headlines about money laundering put pressure on bank stocks. Adding to the negative sentiment was the sad news over the weekend of the death of US supreme court judge Ginsburg which has again highlighted the increasing chance of a contested election come November.

Although risk sentiment appears to be stabilizing into the NY close, there is still a good chance we have not seen the pre-election lows as investors will most certainly demand a massive discount if not huge fire sale for buying risk into one of the most contentious US elections ever.

International markets analysis and insights from Stephen Innes, Chief Global Market Strategist at AxiCorp