After The Close
The market started trading sharply higher in a quick early move today. That increase enabled the major averages to regain a large portion of ground lost since last Thursday’s close. The price action was somewhat unusual, given that consumer confidence for March was worse than expected, and that housing starts and building permits for February were weaker than anticipated. These factors likely increased the odds of a U.S. Federal Reserve interest-rate cut, either later in 2019 or in 2020, and this, in turn, probably improved market sentiment despite the negative news. The Dow Jones Industrial Average jumped by as many as 280 points, while the S&P 500 rose around 32 points. However, the bullishness tapered off and the indices started to trend lower, as investor sentiment waned. This continued throughout much of the day, and the market gave back most of the daily gains before recovering some in the final minutes of the session. All told, the Dow closed up 141 points, the S&P 500 was higher by 20 points, and the NASDAQ climbed 54 points.
Additionally, market breadth was rather positive as advancers outpaced decliners by a 2.4-to-1.0 ratio. Energy-related stocks were among the strongest performers on the day, while consumer discretionary stocks were among the weakest, though only on a relative basis.
In commodity news, oil prices were up today, as supply cuts have driven the price higher. In addition, U.S. Treasury bond rates were a mixed bag, as some were higher and others were lower. Still, the 10-year yield remains below the 3-month yield, showing rates are still inverted, and this is often a negative for bank earnings. The VIX Volatility Index was lower today, as demand for options protection fell.
Looking ahead, tomorrow will be a key day for economic news, such as the Energy Information Administration’s weekly status report on oil inventories. Additionally, the January trade deficit is slated for release. On the earnings front, several large corporations, including a few retailers, are on the docket to report recent quarterly results.
– John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell
The stock market, which had tumbled this past Friday, with the Dow Jones Industrial Average plummeting by 460 points on the release of weak economic data in Europe and a faltering outlook, in general, offshore, started the new trading week yesterday on a muted note, with the Dow and the other indexes off slightly in the first minutes of trading. Soon, however, renewed worries about the business outlook on the Continent caused the Dow to sink by some 130 points.
But that descent, like so many before it this year, would fade quickly. In fact, within a short span of time, the key indexes had gone positive, with the Dow climbing to a gain of about 90 points. But those highs and lows would not endure, and soon thereafter the indexes were gyrating back and forth between those peaks and valleys. It would be that sort of day, with modest moves up and down, but no real breakthroughs on either the bullish fronts for the majority of the morning and afternoon.
Behind the indecisive action was a mixed news backdrop, with a certain degree of relief among some equity traders that the Mueller report apparently had found no collusion between the Administration and Russia during the 2016 campaign, but further consternation that the economic signal abroad were almost all downbeat. There also were fears of a looming economic setback on our shores, as the Treasury yield curve, which first inverted on Friday when the return on the month bill exceeded that on the 10-year note held that position yesterday.
The worry is that an inverted yield curve is often a precursor of a recession. And with Europe already foundering and with our own economy seeing signs of weakening, the jump; from a slower-growth economy to an outright business setback becomes that much simpler. As to the market, after ambling back and forth for much of the morning, things continued on this checkered path during the first part of the afternoon, with the Dow spending a seemingly equal amount of time in the red and the green. The NASDAQ, though, was mostly lower to that point.
This zigzag pattern then would continue into and through the afternoon, with the Dow holding above session lows on the downdrafts and remaining just incrementally positive on the recoveries. That composite, though, was more positive than not. It was a little different on the S&P 500 and the NASDAQ, both of which would spend the majority of the session in the red, but not materially so. In the end, the market would have a divided look to it with just the Dow ending matters slightly in the green.
Altogether, it was an undistinguished session on a Monday that had little news. But after Friday's steep losses, the bulls certainly were in no mood to argue with the benign results. In fact, there probably was a slight tilt to the upside in the aggregate on the final results. Meantime, looking out on a new day now, we see that stocks were nicely higher in Asia in the overnight hours, while in Europe, the leading bourses are gaining modestly.
Finally, our futures are suggesting a solidly higher opening when trading resumes later this morning.
– Harvey S. Katz, CFA
