Before The Bell
The stock market rebounded nicely yesterday, but it was another wild session nonetheless. The breaking news during the session from the Center for Disease Control (CDC) stating that vaccinated people do not have to wear masks in most indoor and outdoor settings helped sentiment improve and the major averages retraced a mid-morning selloff following a higher opening to the day.
In particular, traders bought stocks that would benefit from a further reopening of the economy. The Dow Jones Industrial Average finished the day up 434 points, while the S&P 500 was higher by 50 points. Likewise, the NASDAQ index increased 93 points. Advancers outpaced decliners by a 2.1-to-1.0 ratio on the day, suggesting wide breadth and solid demand for equities.
All told, 10 of the 11 economic sectors were up on the day, with industrials delivering the strongest performance. Energy issues were among the weakest, hurt by a decline in related commodities. U.S. Treasury bond yields were a mixed bag, with short-term rates rising while long-term rates fell. This flattening of the yield curve usually is negative for financial company's earnings, as they borrow short and lend long. The CBOE Volatility Index (or VIX) was lower, as demand for options protection fell.
The futures market continued the positive momentum as it traded further into the green throughout the early evening. Though there were a few disappointing earnings results, such as those at Dow-30 component Walt Disney Co. (DIS) and McKesson Corp. (MCK), the market was generally higher in the afterhours. It continued to move higher through the night. By the early morning, the futures were decidedly in the green, before easing a bit after the release of retail sales figures for April at 8:30 A.M. EDT (more below), but still suggesting a higher start to the week’s final trading session.
Traders will likely look toward economic data for guidance, with most eyes focused on the latest retail sales data released today. Just minutes ago, the Commerce Department reported that retail sales were unchanged in April, versus the consensus expectation for a 0.8% gain. Retail sales, excluding autos, were down 0.8%, while economists were expecting an increase of 0.6%. After the session begins, we will receive the latest report on consumer sentiment.
Looking ahead to next week, most traders will probably focus on several important economic indicators, mainly to determine how well the economy is recovering from the coronavirus pandemic and for more signs about inflation. This data include the minutes of the Fed Open Market Committee on Wednesday afternoon, which should give some insight into what the Fed is thinking about interest-rate policy. Moreover, earnings season will continue next week, though it is winding down with fewer companies reporting with each passing day.
– John E. Seibert III
At the time of this writing, the author did not have positions in any of the companies mentioned.
