Before The Bell
The stock market started out well in the green yesterday, as optimism increased about the eventual end of the coronavirus pandemic and the related shutdowns. Specifically, several states announced lifting business restrictions, which should help the economy recover in the months ahead. The Dow Jones Industrial Average was higher by 277 points in short order, while the S&P 500 was up by around 40 points in the first few minutes of the trading day. However, momentum quickly petered out, and the broader indices slipped and gave back a portion of the gains. Still, this weakness was short-lived, and the markets started to rise again through the rest of the trading day. The Dow found itself up by over 350 points at its apex, though the trading day's final portion had the indices off their highs. All told, the Dow closed up 229 points, and the S&P 500 was higher by 60 points.
Market breadth was very positive, as advancers outpaced decliners by a 3.6-to-1.0 ratio. All sectors of the market were higher, though consumer discretionary stocks advanced the most. On the other hand, consumer staples stocks barely moved above breakeven levels.
The futures market started negatively early on Monday, giving back a portion of the day's gains. However, this negativity did not last long, and the futures were well into the green by the late evening where they stand now.
In commodity news, oil prices were higher yesterday, as traders started to price in less oil production in the United States, while more demand will come from the reopening of the economy. Meantime, U.S. Treasury yields were slightly higher yesterday, as a move away from the safe-haven asset occurred. Too, the yield curve steepened, which is positive for earnings of financial companies. The VIX Volatility Index was lower as demand for options protection declined.
Looking ahead, traders will be assessing several economic releases over the coming days, including initial jobless claims and nonfarm payrolls. Additionally, several regional Fed Chairmen are slated to give their remarks, which could provide more insight into the U.S. Federal Reserve's thinking. Meantime, numerous earnings releases will be issued over the coming days, including from a few key technology companies after the bell today. Over the rest of the week, several large companies in many sectors, most notably healthcare, will report quarterly results. All told, we think that traders will be looking at how the economy will recover from the coronavirus pandemic.
- John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
