Before The Bell
Yesterday was a mixed trading day across the markets. The three major indices started the day off positively, continuing to rally from Monday, the first trading day of the new year. However, a few big technology names fell throughout the session, pulling down the NASDAQ and S&P 500, which are heavily weighted to these names. Overall, the Dow Jones Industrial Average finished the day up 215 points, but the S&P 500 fell three points, and the NASDAQ was down 210 points.
Meantime, market breadth was rather even yesterday, as advancers outpaced decliners by a narrow 1.1-to-1.0 ratio. Energy stocks were among the best performers, aided by a decent move higher in the price of related commodities. Conversely, healthcare equities were among the worst performers, though some tech issues severely underperformed, as well.
The futures markets started off weakly and continued to slide through the evening. Even though the futures had recovered a bit by early morning, but were still in the red. The futures markets held steady following the latest positive payroll release (more below), and remain just below breakeven levels, suggesting a sluggish start to the trading day.
The ADP payroll estimate came out earlier this morning and stated that 807,000 private-sector jobs were added in December. This figure more than doubled the consensus estimate and showed continued job growth.
In commodity news, oil prices rose, as news broke that OPEC agreed to increase production by 400,000 barrels in February. This increase aligns with a prior road map to restore output to levels from deep cuts made in the early stages of the pandemic. Still, traders do not think this uptick will restore the balance between supply and demand.
Meantime, U.S. Treasury bond yields were a mixed bag, as short-term yields rose and long-term yields fell. This bifurcated performance is negative for financial companies’ earnings, which borrow at short-term rates and lend at longer durations. The VIX Volatility Index increased slightly as demand for options protection rose. This is seen as a higher potential for price volatility in the days ahead.
Looking forward, the economic releases will pick up in the coming days. These include reports on jobless claims and the ISM Nonmanufacturing Index tomorrow. Nonfarm payrolls and the unemployment rate are slated for Friday. Meantime, the earnings calendar is a bit empty for the rest of the week, though Dow-30 component Walgreens Boots Alliance (WBA) is slated to report on Thursday. Still, earnings reports should pick up in the weeks ahead as many companies deliver their year-end tallies.
– John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
