Stocks Edge Higher In Chaotic Trading

Hi Everyone,

The major indices all finished in the green following a very choppy and nervous session on Wall Street, as investors tried to gauge the impact of the rescue packages announced by central banks and governments across the globe. The Dow was up 188, or 1.0%, to 20,087, the Nasdaq gained 161, or 2.3%, to 7,151, while the S&P 500 rose by 11, or 0.5%, to 2,409. Advancing issues outnumbered decliners by a 3-to-1 ratio on the NYSE, where volume remained extremely heavy.

Traders said that stocks had one of their most chaotic days in history, as the wild moves across asset classes, and the global response to the crisis created a highly unstable trading environment. As one trader explained, “It would be a stretch to call a day with trading ranges wider than 5% in the major indices a calm one, but compared to the volatility in bond and currency markets, stocks were relatively stable, even though price action was extremely choppy amid the continued virus-related uncertainty.”

It has been hard to keep track of all the monetary and fiscal steps that global authorities took this week, and since yesterday’s close, central banks fired several shots again. The European Central Bank (ECB) announced an $820 billion quantitative easing (QE) program, the Bank of England (BOE) cut its benchmark rate to 0.1% and announced a £200 billion QE program, while the Fed opened a new facility targeted at money markets. How much these measures will help with the very real effects of the lockdowns remains to be seen, but central banks are using all of the tools that they have to boost investor and consumer confidence.

Walmart (WMT) hit a new all-time high today, confirming that cooler heads are starting to prevail on the Street, and a lot of consumer-related stocks also jumped, despite the much higher number of new jobless claims. Energy stocks also surged higher amid the calls for an embargo on Russian and Saudi Arabian crude oil, but tech stocks, services, and most importantly, financials also showed strength today. Compared to the extent of the recent selloff, today’s gains were still minuscule, but should financials stabilize, the whole market could get a major boost.

Volatility remained extremely high today on Wall Street, but the Volatility Index (VIX) declined substantially after topping 85 yesterday, which is a level only seen on the darkest days of the financial crisis. Yesterday’s positive breadth divergence and the behavior of the VIX could both mean that we reached “maximum panic” and, the markets will start to normalize in the coming days. While that does not mean that we could not still see new lows since the impact of the pandemic is still hard to judge. However, the era of major market dislocations might be over.

As always, have a great evening, stay calm, stay home, stay healthy, do your part to flatten the curve and stay tuned!!!

Joe

Skills

Posted on

March 20, 2020

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