After The Close - The stock market managed to rally today, after yesterday’s dramatic selloff. At the end of the session, all of the major averages were firmly in positive territory, helped by a late-day buying campaign. The Dow Jones Industrial Average was ahead 567 points; the broader S&P 500 Index was up 46 points; and the NASDAQ was higher by 146 points. Market breadth showed a strong session, with winners well ahead of losers on the NYSE. From a sector perspective, the consumer cyclical stocks, technology issues, and basic materials names displayed strength today. In contrast, the defensive utility group declined, as investors seemed to be feeling less risk averse.
Elsewhere, traders received just one notable economic news item this morning. Specifically, the nation’s trade deficit came in at $53.1 billion for the month of December, where analysts had been looking for a more favorable reading. Tomorrow will be a relatively light day for economic reports. However, for those closely watching the energy patch, the EIA will release its latest weekly crude oil inventory figures.
Meanwhile, the fourth-quarter corporate earnings season is still unfolding. Today shares of General Motors (GM) traded higher in response to a respectable report. In the energy area, shares of BP plc (BP) advanced after the oil and gas giant delivered an encouraging release.
Technically, after several days of weakness, the stock market seems to have found some support at the current level. However, it is not yet clear that the bulls will regain complete control over the market. Of note, many on Wall Street will be watching to see if equities will hold steady, or even pick up further, over the next several days. Furthermore, while the corporate outlook is bright, traders will likely remain concerned about additional interest rate hikes and the possibility of rising inflation as we move through 2018. - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - Following a monumental selloff in the stock market this past Friday, in which a further rise in interest rates spooked investors sufficiently to send the Dow Jones Industrial Average down by 666 points, the Dow futures tumbled by some 250 points on Sunday night ahead of yesterday's open. Not surprisingly, the 30-stock Dow and the market, in general, opened to the downside when live trading began yesterday morning. The fear of rising rates, a worry for weeks now, clearly ticked up after the government reported a strong gain in employment in January.
Of course, it wasn't just the 200,000 rise in January non-farm payrolls that worried investors, but also the second large increase in average hourly wages in as many months that turned the tide on the Street. Additionally, there was speculation that the Federal Reserve might opt to raise interest rates by four times this year, rather than the consensus three times. Meanwhile, following the Sunday-night slide in U.S. futures, stocks fell in Asia and Europe overnight while interest rates eased slightly here, as investors stateside sought to limit risk.
Stocks then slid on our shores to begin the trading day, with the Dow falling to a loss of about 350 points just after the open before starting to rebound in the minutes that followed. The comeback continued, and as we passed the first hour of trading. In total, the Dow made up all of that initial loss, even though interest rates ticked a bit higher again, with the 10-year U.S. Treasury's return climbing to 2.86%. The 30-year bond's yield rose to 3.12%, at the same time. The NASDAQ, meantime, had jumped by some 30 points.
Then, after climbing the mountain to a breakeven Dow, stocks could not get over the mountain and fell back once again, so that as traders returned from lunch, the Dow had fallen back by more than 350 points once more, while the S&P 500 Index and the NASDAQ had dropped 33 and 55 points, respectively. One slightly positive note was that bond yields eased back some, with the 10-year Treasury note returning to 2.84%. But that pullback was just the start of things, as it would turn out, and a mere teaser to what would transpire as the session proceeded.
In all, fears of a worsening pullback and a correction of some note in a still pricey stock U.S. market sent the bulls fleeing, and stocks really tumbled as we reached the final hour of trading. On point, the Dow would descend more than 1,500 points, falling, for a time, below 24,000. Then, an attempt was made to right the ship, with the Dow's deficit momentarily being halved to some 750 points. But that try at turning the bearish tide would falter near the close, as the Dow would drop to a closing loss of 1,175 points.
In addition to the Dow's monumental loss, the S&P 500 Index shed 113 points and the NASDAQ dropped 273 points. Losses were substantial in whole groups of stocks. In all, from peak to trough, the Dow's loss is just over 10%, which qualifies that setback as a correction. Interestingly, yields on the 10-year Treasury note would fall to 2.79% late yesterday. But that comeback by the bond market (prices and yields move in opposite directions) was likely more a flight to safety than any lasting shift in sentiment.
Now, following yesterday's fireworks in the U.S. stock market, we look overseas to the indexes in Asia, where we saw large losses in overnight trading. In Europe, meantime, stocks are moving lower, as well, at this hour. In other comings and goings, oil prices are off slightly and Treasury yields, down to 2.79% on the 10-year note, are now at 2.72%. Finally, following yesterday's full-fledged rout of the bulls, the U.S. futures now are suggesting a somewhat lower opening when live trading resumes later this morning. But, however the market opens, it seems almost a given that trading will be volatile and hectic. Stay tuned. - Harvey S. Katz, CFA