Before The Bell - The stock market started slightly in the red yesterday. A few earnings reports from the big banks were viewed by Wall Street as less than favorable, while Dow-30 component Boeing (BA) stated that delivery delays were likely for its 787 Dreamliner. Meantime, the CPI report showed that inflation was up 5.4% year over year, which gave investors some pause. This sent stocks lower, and some traders moved into Treasury issues. Overall, the Dow Jones Industrial Average fell 107 points, the S&P 500 was off 15 points, and the NASDAQ was lower by 56 points.
Market breadth was very negative, as decliners outpaced advancers by a three-to-one ratio. Technology issues were among the best performers on the day, helped by outperformance in a few big names. However, REITs were among the biggest laggards, hurt by potential changes in interest rates. Oil prices were largely lower on the day.
Meantime, U.S. Treasury bonds were a mixed bag, with short-term rates rising and long-term rates falling. This usually portends a bad environment for the earnings power of financial companies.
The VIX Volatility Index climbed yesterday, as demand for options protection rose.
The futures market continued the negative price movement from the trading day. By midnight, the indices were decidedly in the red. However, momentum shifted overnight, and the futures markets are now trending higher, suggesting a higher start to the trading day.
Looking ahead, traders will likely keep an eye on a few economic reports scheduled to be released over the coming days. These include the Producer Price index (released this morning), the Empire State and Philly Fed Indexes are due on Thursday, along with the latest initial weekly jobless claims figures. Earnings season continues to pick up, with several large banks reporting quarterly results before today’s opening bell. Overall, we think that investors will probably look at the quality of the earnings reports to see if they can glean any more information about the direction of interest rates. The latter issue is sure to be discussed during Federal Reserve Chairman Jerome Powell’s two-day testimony before Congress, which kicks off later today. That event is expected to be closely watched by Wall Street. - John E. Seibert III