Hi Everyone,
The stock market bounced back following yesterday’s late-day plunge and finished the session with sizable gains across the board thanks to the improving COVID-19 outlook. The Dow was up 780 or 3.4%, to 23,434, the Nasdaq gained 204, or 2.6%, to 8,091, while the S&P 500 rose by 91, or 3.4%, to 2,750. Advancing issues outnumbered decliners by a 9-to-1 ratio on the NYSE, where volume was moderately heavy.
Traders said that while stocks had a two-faced session, with the all-important tech sector lagging the broader market, today’s rally in the most cyclical sectors was still very impressive. As one trader explained, “Small-caps and cyclicals led today’s encouraging rally following yesterday’s nasty intraday reversal, but the Nasdaq’s relative weakness is usually a bad omen for bulls, so caution is still warranted.”
Despite the enormous size of the already anacted $2.2 trillion stimulus bill, another package is already taking shape in Washington, primarily focused on the small-business sector. The rumored $250 billion would be much needed in one of the hardest-hit parts of the U.S. economy to prevent an even larger blow to the job market. House Democrats would also grant an additional $100 billion to hospitals and community health centers amid the huge demand for protective and testing equipment and the fears of a possible second wave of infections.
While today’s stimulus-driven rally among small-caps was a plus for bulls, the Russell 2000 remains relatively weak compared to its large-cap peers. The Volatility Index (VIX) hit its lowest level in a month too, but as long as economic uncertainty remains high, volatility is likely here to stay. That is especially true since global bond markets continue to show signs of stress as well, and even though U.S. corporate bonds had a positive day, credit spreads remain wide. The global dollar shortage continues to cast a shadow on the recovery.
For almost a week, the energy sector has been buoyed by the possibility of a historic oil supply cut by OPEC and Russia. However, analysts warn that even the optimistic 15 million barrel-per-day reduction might fall short of stabilizing energy markets. The U.S. energy sector experienced a strong bounce following the March-bloodbath in the sector, but while the panic subsided, demand worries are likely to weigh heavily even on the financially stable members of the sector. A few analysts think that the cartel might try to shock the market with an even larger decrease in output, which could lead to another record-breaking day for the sector.
As always, have a great evening, stay calm, stay home, stay healthy, do your part to flatten the curve and stay tuned!!!
Joe
Marketing Research Commentary