Before The Bell
The stock market fell in early trading yesterday, as traders feared that an economic recovery from the coronavirus would take longer than initially thought. That early weakness followed setbacks in the futures overnight. Then once the markets opened, the prices fell deeply into the red. The S&P 500 was down as many as 90 points, while the Dow Jones Industrial Average was lower by 950 points at its nadir. However, the markets had become severely oversold, and the indices started to rebound. By the end of the trading session, the Dow was lower by 510 points, while the S&P 500 was off 38 points.
Market breadth was very negative as decliners outpaced advancers by a 5.9-to-1.0 ratio. Industrial stocks were among the worst performers on the day, while technology equities were among the best. The latter was the only positive sector.
This past evening, the futures market started in the green, continuing the upward momentum that characterized that last portion of the trading session. However, this momentum did not hold into the night, and the futures fell back into the loss column. At present the futures are somewhat mixed.
In commodity news, oil prices were slightly higher yesterday. Meantime, U.S. Treasury bond yields were a mixed bag, as short-term interest rates rose, while long-term issues fell. This usually is a negative for the earnings of financial companies, as they borrow short and lend long. The VIX Volatility Index rose yesterday, as demand for options protection increased.
Looking ahead, all eyes will be on U.S. Federal Reserve Chairman Powell’s testimony to Congress today. Traders expect him to say that there has been some “marked improvement” in the economy, but that a recovery is still “highly uncertain.” Additionally, a few other regional Fed officials will make speeches later in the day. Meantime, the earnings slate is relatively bare, though Dow-30 component NIKE (NKE) will report after the close today. Overall, we think traders will focus on the Fed Chairman and any developments on the coronavirus front.
- John E. Seibert III
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
