Before The Bell - The stock market started to the downside yesterday. A move lower occurred in many social media companies’ stocks after making decisions to ban President Trump from their platforms after the riots in Washington, D.C. last Wednesday. The Dow Jones Industrial Average was lower by 265 points in short order. The S&P was off 28 points, as well. However, this move quickly started to reverse, and the markets continued to rebound. By around midday, both indexes had recovered a notable portion of their losses. Still, this improvement in sentiment was short-lived, and the market trended lower throughout the rest of the day, with the averages ending not far off their prior lows. All told, the Dow closed lower by 89 points, the S&P was off 25 points, and the NASDAQ lost 166 points.
Moreover, market breadth was rather negative as decliners outpaced advancers by a 1.5-to-1.0 ratio. Energy stocks were among the strongest performers on the day, aided by a rise in natural gas prices amid expectations of a cooler winter. Meantime, consumer discretionary issues were among the worst performers.
After the closing bell, the futures market showed some signs of a rebound from the day’s losses. Though this movement was choppy throughout the night, the futures markets finished decidedly green, suggesting a positive start to the trading day.
In commodity news, oil prices fell slightly yesterday as traders reduced near-term demand expectations. Meantime, U.S. Treasury bond yields rose yesterday, as inflation expectations increased. Long-term rates expanded more than those with shorter durations, suggesting a steepening yield curve, which usually improves financial companies’ earnings. The VIX Volatility Index rose significantly as demand for options protection increased.
Looking ahead, a lot of economic news will be released over the coming week, including the Consumer Price Index for December before the opening bell tomorrow, as well as retail sales later in the week. Moreover, earnings season will kick off later this week, as several large banks, such as Dow-30 component JPMorgan Chase (JPM), are slated to report quarterly results. Overall, we think that most traders will be looking towards any developments with the coronavirus, its vaccine distribution, and the political situation at home. - John E. Seibert III