Before The Bell
The stock market started positively yesterday, as some U.S. citizens received stimulus checks from recent legislation. Additionally, state economies have benefited from the loosening of restrictions related to the coronavirus pandemic. The Dow Jones Industrial Average was up by 152 points in the first few minutes of the session, while the S&P 500 was higher by 7 points. This price action was short-lived, though, and the indices retreated into the red for a brief spell. However, the indices became quickly oversold, regained their positive momentum, and moved up throughout much of the afternoon. The broader markets also spiked in the trading session's final hour and eventually closed not too far from their highs of the day. Overall, the Dow closed up 175 points, while the S&P 500 was ahead 26 points.
Moreover, market breadth was rather positive, with advancers outpacing decliners by a 1.7-to-1.0 ratio. Consumer discretionary stocks were among the best performers on the day, while energy issues were among the weakest, hurt by lower prices in the related commodities.
Specifically, oil prices fell yesterday and the price retreated from recent highs. Traders took some profits on the commodity, which has benefited from much-higher demand over the last month. Meanwhile, U.S. Treasury bond yields were slightly lower, and long-term rates fell more than those with shorter terms, which is usually negative for financial company earnings. The VIX Volatility Index fell yesterday, suggesting that demand for options protection eased.
In the after-hours, the futures markets started in the red, giving back a portion of the day's gains. However, as the evening turned to night, the markets slowly crept higher, breaking even before midnight. The futures stayed around these levels, suggesting a neutral start to the trading day.
Moving forward, traders will be looking to several economic releases, including capacity utilization and retail sales for February. These reports should show how the economy is recovering. Later in the week, Federal Reserve Chairman Powell will deliver a press conference following the FOMC meeting, which may offer insight into how the Federal Reserve is thinking. Meantime, several large companies will report earnings throughout the week, including Dow-component Nike (NKE) on Thursday. Overall, we think traders will focus on how the economy is recovering from the coronavirus pandemic and where treasury yields are headed.
- John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
