Down 40 points on disappointing Retail Sales? I don't think so, not by itself. Weak Retail Sales by itself should not have the Dow down 369 points, the S&P down 40. Retail Sales weak would never have hit the tape like this a month ago.
So what else contributed? My hedge-fund friends insisted that the Shire-Abbvie deal falling apart was an additional major problem for an industry that has already been clobbered in September and October. This was a $54 billion deal with a lot of buy-in from major hedge funds, as David Faber very adequately covered this morning.
You can understand how frustrated they all have been. Many were long U.S. stocks and particularly long growth stocks, all the "right" sectors of the market. But that trade has been wrong, particularly the shale plays that have been particularly heavily owned.
And what about that head-snapping turnaround? About 9:44 a.m., there was a sudden whoosh of buy orders, which showed up very noticeably in ETFs like the iShares Core S&P 500 (IVV) and theiShares Russell 2000 (IWM). The IVV had massive volume at this time: by 10 a.m. it had done almost 100 percent of its average daily volume in the past month; the IWM had done about 60 percent. Both of these are used by professional traders to get in and out of the market quickly.
Why the sudden spate of buying interest about 9:40 a.m.? Some noted that oil turned positive at that time, and that the dollar turned around. Oil does not normally lead the market, but given the deflation concerns this may have been a factor.
Regardless: what is clear is that a group of traders saw value in a sharp, sudden downturn in the market and aggressively bought, and I mean aggressively. There was a buzz on the floor at 9:45 as the rush of orders came, a buzz that is not often seen any more.