Before The Bell
The futures market started strong after-hours yesterday, continuing yesterday’s bullish trading session, as fears about the Omicron variant of the coronavirus abated some. The stock market indices rose sharply, moving much higher in the first few hours of the trading session. However, they spent much of the day trending sideways after the early move higher and ended not too far from their intraday highs. Overall, the S&P 500 rose 95 points, the Dow Jones Industrial Average increased 492 points, and the NASDAQ was higher by 462 points. The futures markets moved higher through the early evening and were well into the green by midnight after the U.S. House of Representatives overwhelmingly approved a bipartisan defense authorization bill. By morning, the futures had maintained their positive price movement. This trading could be impacted by a 10:00 A.M. (EST) report on job openings and quits in October, which should show how workers are feeling about the labor market, but nonetheless, the positive price movement suggests a higher start to the trading session.
In general, market breadth was very strong yesterday, as advancers outpaced decliners by a 3.8-to-1.0 ratio. Technology sector stocks were among the best performers, aided by swift moves higher in a few key names. On the other hand, consumer staples equities were among the weakest, though only relatively.
In commodity news, oil prices were higher yesterday. Traders think demand will now exceed prior projections, as the Omicron variant will not pose as many challenges to travel industry and the overall economy as many pundits had initially feared. Commentary this morning from Pfizer (PFE) that its studies show its vaccine to be effective against the variant added to sentiment. Meanwhile, U.S. Treasury yields were a mixed bag, as short-term rates rose a bit while long-term yields fell. This flattening of the yield curve is usually negative for financial companies’ earnings. The VIX Volatility Index fell significantly yesterday, as demand for options protection declined.
Looking forward, a few economic reports will be released in the days ahead, including household wealth and domestic nonfinancial debt on Thursday and the November Consumer Price Index reading—including core inflation data—and the University of Michigan Consumer Sentiment Index on Friday. These should show the state of the consumer and give some insight into what the Fed will be looking into when it makes its final monetary policy decisions of 2021 at next week’s Federal Open Market Committee meeting. Meanwhile, the earnings calendar will be rather light, with third-quarter earnings season in the rearview mirror. All told, we think most eyes will be looking towards the inflation data later this week.
– John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
