Market Perspective for February 5, 2018

Equities sold off broadly on Monday, but most shares bounced significantly from intraday lows before the closing bell.  The Dow Jones Industrial Average closed 4.60 percent lower on the day, the S&P 500 fell 4.10 percent, and the Nasdaq 3.78 percent.

Short-term technical indicators showed the S&P 500 Index was overbought for all of January, but the selling over the past few days has pushed this towards an oversold condition. This indicates the selling might be close to finished. The VIX index spiked to 37.32 on Monday, its highest reading since August 2015. A short-squeeze in the VIX may have driven much of Monday’s afternoon selling.

Bonds decoupled from stocks and moved higher on Monday. Bond selling sparked the initial equity selling last week. This move in bonds should shore up markets in the days ahead.

Jerome Powell was sworn in as Federal Reserve chairman on Monday. The ISM services PMI ticked up to 59.9 percent in January, up from 56 percent in December. The Job Openings and Labor Turnover Survey (JOLTS) and consumer credit reports for December will be out later this week.

Bristol-Myers (BMY) rallied on Monday after strong earnings before heading lower with the broader market. Disney (DIS), Gilead Sciences (GILD), BP plc (BP), General Motors (GM), Allergan (AGN), Sanofi (SNY), Rio Tinto (RIO), GlaxoSmithKline (GSK), Tesla (TSLA), Philip Morris International (PM), Nvidia (NVDA) and CVS Health (CVS) are also scheduled to report earnings this week.

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