Sorry but this is not accurate. At 3:40pm , with the Dow down about 80 points, but stable, Eamon Jafers went on CNBC from the White House and announced that based on his sources the President would not offer any new proposals. This really disappointed the markets because the perception was why come back from Hawaii if there wasn’t movement towards an agreement (remember that the House Reps were told to be back in town to vote on Sunday). This greatly disappointed the markets and the sell-off accelerated.
The futures selloff beyond that was a piling on due to low volume late in the session (if you wanted as a portfolio manager or hedge fund manager to either get short or lighten up positions you couldn’t when the market was open because there wasn’t enough volume to trade against. So those managers decided to sell futures against their position, resulting in this plunge after-hours. If it is a hedge against a long position it does not necessarily mean the sell-off will occur on the opening Monday.
The real issue as i see it is that Obama now looks like a fool for coming back to D.C. without a deal already decided. This looks like grandstanding to Wall Street (and they are right about that). It makes him look ineffective and the next wave will be whether the overseas investors pull money out Monday morning. The only saving grace in all this is that market participation is still pretty soft, which should limit some of the damage next week.
I thought the futures market came into play after the market closed at the end of the day — and ahead of the market opening in the morning. Nobama came on TV at 5:45 pm. The futures crashed after that, as I understand it. The 227 point plunge in futures down to 12,777 is in addition to the 158 points the market fell during trading hours, when it closed below 13,000 at 12,938.
I’m not entirely sure what it all means. Maybe someone else has a better understanding of the futures market.