Before The Bell - The stock market started deeply in the loss column yesterday, on fears about the rising caseload of coronavirus patients. The Dow Jones Industrial Average found itself notably lower in short order, and the indices moved down further through the morning. Selling continued throughout the day, and the composites reached their nadirs by the mid-afternoon. At that point, the Dow was down 965 points, and the S&P 500 was off 101 points. Still, traders lightly purchased at the end of the day, keeping the indices just above their lows. All told, the Dow closed down by 650 points, while the S&P 500 was in the red by 64 points, ending the worst day in nearly two months.

Moreover, market breadth was decidedly negative as decliners outpaced advancers by a 6.2-to-1.0 ratio. All 11 sectors were lower on the day, but energy stocks were among the worst performers, hurt by a price decline in the related commodities. On the other hand, utilities fared much better, nearly breaking even on the day.

Once the futures market started trading yesterday afternoon, the indices moved to the upside, continuing this positive trend that began late in yesterday’s trading session. However, price action was somewhat choppy throughout the evening. Currently, the futures were moderately in the green, suggesting a stronger start to the day.

In commodity news, oil prices fell significantly yesterday, dropping more than 3% and under the $40 per barrel level. Traders think that higher cases of coronavirus will lead to reduced travel and less oil demand. 

Meantime, U.S. Treasury bond yields were lower across the board, as a flight to safety occurred. Long-term rates fell more than short-term ones, which usually is negative for the earnings of financial companies. The VIX Volatility Index was higher as demand for options protection increased.

Looking ahead, a substantial amount of economic data is on the schedule for release today. These include the Cash-Shiller national home price index for August and the consumer confidence index for October. More reports are on tap for the rest of the week, but most eyes will be looking toward the initial jobless claims report and consumer sentiment on Thursday and Friday, respectively. Moreover, today will be an important day for earnings releases, as Dow-30 components Merck (MRK), Caterpillar (CAT), 3M (MMM), and Microsoft (MSFT) will report quarterly results. We imagine traders will focus on these earnings reports and any developments concerning the coronavirus cases or continuing efforts to fashion a fiscal stimulus package. - John E. Seibert III

At the time of this article’s writing, the author held positions in one or more of the companies mentioned.