The futures markets are well in the green this morning, continuing a strong rebound in prices on Tuesday following the market rout on Monday. A few large companies have reported stronger-than-expected earnings, such as Dow-30 component and entertainment conglomerate The Walt Disney Co. (DIS), which beat estimates and reported a profit on its streaming services. Elsewhere, Japan’s NIKKEI Index rebounded strongly this morning following a statement from the Bank of Japan that the agency would not raise interest rates when markets were unstable. A sell-off in this market occurred early on Monday, and the decline in investor sentiment was a key contributor to the downturn in the U.S. indices. Overall, these factors suggest a strong start to the trading session today.
The stock market started well in the green yesterday, rebounding from negative price action on Monday. The indices moved higher through much of the day as sentiment improved, before eventually selling off a bit in the final portion of trading. Overall, the S&P 500 rose 54 points (up 1.04%), the NASDAQ increased 167 points (up 1.03%), and the Dow Jones Industrial Average was higher by 294 points (up 0.76%). Market breadth was quite positive, as advancers outpaced decliners by a 3.2-to-1.0 ratio. All eleven stock market sectors finished in the green yesterday, and REITs were amongst the strongest performers. On the other hand, healthcare stocks were amongst the weakest on a relative basis.
In commodity news, oil prices were choppy through much of yesterday’s session, but finished the day on an uptick as traders priced in higher levels of geopolitical risk. Additionally, the U.S. Energy Information Administration raised its forecast for oil consumption in America in 2024. Elsewhere, U.S. Treasury bond yields trended higher as traders moved away from the safe-haven asset. Long-term yields moved more than those with shorter durations, flattening the yield curve. After calls for an emergency rate cut on Monday, market participants are pricing in greater odds of a 50-basis-point interest rate cut at the Federal Open Market Committee (FOMC) meeting in mid-September. The Chicago Board Options Exchange Volatility Index, or VIX, commonly known as the fear index, fell rapidly as traders priced in lower levels of future volatility. The VIX spiked to highs not seen since the market collapse in March of 2020 associated with the coronavirus pandemic, but the Index trended lower as the stock market recovered.
Few economic reports are slated for the days ahead, though we think the initial jobless claims on Thursday will be watched a bit more closely than usual. Earnings season will continue in the days ahead, though the number of the reports and the size of the companies reporting are both getting smaller. - John E. Seibert III
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
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