Photo: Hiroshi Watanabe/Getty Images

The U.S. stock market may be running low on liquidity, experts say, and that could very well weigh down prices and lead to further selling.

Why it matters: The dysfunction over the past few weeks in the repo market, which is where large financial institutions sell assets like Treasuries when they need quick cash, may have been the first signal of a wide-ranging liquidity shortage.

  • That shortage could be poised to deliver a larger shock to the broader financial system, with Wednesday's stock market selloff being the latest (and most prominent) example of a liquidity event.

What they're saying: "Over the past year we have seen liquidity risks bubbling up," Bank of America Merrill Lynch equity and quant strategist Savita Subramanian said in a note to clients.

  • "When the wall of worry turns to panic selling, we worry about an unlikely area of liquidity risk: the S&P 500."

The nagging issues in the repo market are "just a symptom of a larger macro problem," Yves Lamoureux, president of macroeconomic research firm Lamoureux & Co., told Axios.

  • "The economy requires much more credit and the Fed has gone too far in its tightening of the balance sheet."
  • "Liquidity is the blood needed to hold up the stock market. The simple fact that indices are dropping like rocks is a testament to its lack thereof."

Watch this space: The rapidly rising popularity of passive investing, converging stock ownership, and increasing fund flows from pension funds and large money managers into private equity is drying out typical sources of liquidity to the stock market and could mean major outflows in the face of bad news, Subramanian adds.

  • "Liquidity rarely matters, but when it does, it's all that matters."

Go deeper: The ultra-liquid ultra-rich

Go deeper

Biden: The next president should decide on Ginsburg’s replacement

Joe Biden. Photo: Drew Angerer / Getty Images

Joe Biden is calling for the winner of November's presidential election to select Ruth Bader Ginsburg's replacement on the Supreme Court.

What he's saying: "[L]et me be clear: The voters should pick the president and the president should pick the justice for the Senate to consider," Biden said. "This was the position the Republican Senate took in 2016 when there were almost 10 months to go before the election. That's the position the United States Senate must take today, and the election's only 46 days off.

Trump, McConnell to move fast to replace Ginsburg

Photo: Alex Wong/Getty Images

President Trump will move within days to nominate his third Supreme Court justice in just three-plus short years — and shape the court for literally decades to come, top Republican sources tell Axios.

Driving the news: Senate Majority Leader Mitch McConnell and Senate Republicans are ready to move to confirm Trump's nominee before Election Day, just 46 days away, setting up one of the most consequential periods of our lifetimes, the sources say.

Updated 8 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 10 p.m. ET: 30,393,591 — Total deaths: 950,344— Total recoveries: 20,679,272Map.
  2. U.S.: Total confirmed cases as of 10 p.m. ET: 6,722,699 — Total deaths: 198,484 — Total recoveries: 2,556,465 — Total tests: 92,163,649Map.
  3. Politics: In reversal, CDC again recommends coronavirus testing for asymptomatic people.
  4. Health: Massive USPS face mask operation called off The risks of moving too fast on a vaccine.
  5. Business: Unemployment drop-off reverses course 1 million mortgage-holders fall through safety netHow the pandemic has deepened Boeing's 737 MAX crunch.
  6. Education: At least 42% of school employees are vulnerable.