Before The Bell - The stock market started out on a weak note yesterday, as traders priced in earlier interest-rate hikes due to a stronger-than-expected economic recovery in recent weeks. U.S. GDP forecasts have been rising, while the Congress appears poised to deliver some COVID-19 stimulus bill to the President’s desk later this week. These positives have caused traders to think that interest-rate policy will shift sooner and be less accommodative than prior projections. The Dow Jones Industrial Average was down 208 points, while the S&P 500 was off 32 points in the early going. The negative momentum quickly petered out, however, and the markets started coming back in the middle of the session. The Dow traded well into the green and was up 159 points at its peak. That said, the momentum did not carry over to the S&P 500, which is more heavily weighted toward technology stocks. However, the markets trended lower in the final portion of the session. Overall, the Dow finished up just 27 points, the S&P 500 was down 30 points, while the NASDAQ fell more than 300 points on weakness in technology.
Meanwhile, advancers and decliners were about even on the day. Energy stocks were among the best performers, aided by price increases in the related commodities. However, technology issues were among the weakest.
In commodity news, oil prices rose considerably as traders priced in demand increases and a worldwide economic recovery. Reduced production is also being priced into the energy source. Meantime, U.S. Treasury bond yields were a mixed bag, though the moves were relatively small in either direction. The VIX Volatility Index was higher yesterday, as demand for options protection rose a bit.
The futures markets were choppy in after market action, moving between red and green. By midnight, they had settled into positive territory. However, the indices slipped throughout the night and are now well into the red, suggesting a gloomy start to the trading day, once more led lower by the NASDAQ.
Looking ahead, plenty of economic data will be released over the coming days, including the Case-Shiller home price index this morning.
Meanwhile, many eyes will be on Federal Reserve Chairman Jerome Powell’s testimony to the Senate Banking Committee at 10 A.M. EST., which should show insight into potential Federal Reserve interest-rate policy. Later in the week, initial jobless claims and the University of Michigan’s consumer sentiment index are on the docket. Meantime, earnings season continues with many large companies slated to report quarterly results both before the bell and after the close. Overall, we think economic and earnings data and any developments concerning the coronavirus and vaccine distribution will drive trading in the coming days. - John E. Seibert III