Hi Everyone,
The stock market finished higher following a memorable short-covering rally that lifted the benchmarks from fresh multi-week lows. The Dow was up 377 or 1.6%, to 23,625, the Nasdaq gained 81, or 0.9%, to 8,944, while the S&P 500 rose by 33, or 1.2%, to 2,853. Advancing issues outnumbered decliners by a 5-to-4 ratio on the NYSE, where volume was moderate.
Traders said that while today’s rally was typical of bear markets, the fact that financials led the way higher is a positive sign. As one trader explained, “Bulls were glad to see that financials erased at least part of their recent steep losses, but the coming days will be crucial in deciding whether or not we just saw a classic ‘dead-cat-bounce’ on Wall Street.”
While today’s intraday reversal was very impressive a lot of risk measures remain bearish. Small-caps finished the day virtually unchanged, despite the bounce, the Volatility Index (VIX) remains high, and the traditional safe-haven assets remained strong as well, suggesting that this week’s selloff might not be over just yet. Treasuries closed higher across the board, gold enjoyed inflows throughout the day, and the dollar gained ground against most of its peers, with weakness in the euro and the Great British pound being especially apparent today.
Besides gold, commodities showed strength across the board today, which is slightly surprising given the risk-off sentiment across financial markets. The price of crude oil and copper both increased, despite the WHO’s gloomy virus-related projections, and a report claiming that air travel would not recover from the COVID-shock until 2023. While Saudi Arabia’s surprise supply cut definitely helped oil this week, its relative strength is still a bullish sign, and it might mean that economic worries are overblown.
The retail sales report will be in focus tomorrow morning, in terms of economic releases. Following last month’s historic decline, sales are expected to fall by an additional 12.0%, the most on record. The less volatile core sales measure is forecast to drop by 8.5% from April, which was the worst month of the pandemic for the U.S. economy. The Michigan consumer sentiment number and the JOLTS job openings estimate will also be released tomorrow, together with the change in business inventories and the Eurozone GDP and trade balance.
As always, have a great evening and stay tuned!!!
Joe
