Hi Everyone,
The stock market finished higher despite the third bearish afternoon session in a row, with the Nasdaq once again outperforming the other large-cap benchmarks. The Dow was up 211 or 0.9%, to 23,878, the Nasdaq gained 125, or 1.4%, to 8,980, while the S&P 500 rose by 33, or 1.2%, to 2,881. Advancing issues outnumbered decliners by a 3-to-1 ratio on the NYSE, where volume remained relatively light.
Traders said that PayPal’s (PYPL, +14.2%) bullish guidance boosted the battered financial sector today, and thanks to banks, all traditional risk-on sectors finished in the green. As one trader explained, “Bulls badly needed a bounce in financials, but despite today’s gains, the prospect of negative interest rates could weigh heavily on banking stocks, given today’s plunge in short-dated Treasury yields.”
The Nasdaq turned positive on a year-to-date basis today, erasing all of its COVID-19 dip, which is an incredible feat considering the economic damage caused by the pandemic. Under-the-hood, the picture is not as pretty, as only a handful of stocks are behind most of the tech benchmark’s gains. The same is true in the case of the other large-cap indices, and although small-caps have been clearly lagging behind the broader market, the weak breadth is apparent even looking at the more valuable issues. Even though this doesn’t mean that the rally is doomed, it seems likely that for a broader rally to develop, economic uncertainty must decline.
Treasury yields fell across the curve today, in the wake of the higher-than-expected number of jobless claims, and the two-year yield hit a new record low. The implied Fed fund rates dipped into negative territory for the first time ever, and even though negative rates seem unlikely right now, judging by the Fed’s communication, a lot of investors seem to disagree. Negative interest rates have been with us for years outside of the U.S. Despite their questionable effectiveness, analysts have been suspecting that the Fed might follow in the footsteps of its overseas peers due to the COVID-19 pandemic.
Aerospace giant Raytheon (RTX, -1.6%), formerly known as United Technologies, reported earnings before the opening bell, and the restructured company beat the consensus estimate by a wide margin on its bottom line. The company withdrew its guidance for the rest of the year, and the stock finished the day in the red despite the rally in the industrial sector. On a positive note, the shares of Hilton Worldwide (HLT, +1.6%) inched higher thanks to the company’s positive earnings report, but the most-affected industries continue to lag behind the major indices severely.
The government jobs report will likely steal the show tomorrow morning in terms of economic releases, and analysts expect an apocalyptic 21.4 million drop in non-farm payrolls. The unemployment rate is forecast to jump to 16% as well, and although the majority of job losses could turn out to be temporary, the job market is still likely to take a historic hit. Hourly wages are expected to tick higher by 0.3%, and we will also get the German trade balance in pre-market trading, which could shed some light on the state of the global economy.
As always, have a great evening and stay tuned!!!
Joe
