Markets Grind Higher
Volatility Remains Low...
KR Opinion
As we skate into the weekend, it's fascinating to note that the financial rollercoaster we've been riding owes most of its thrills to just a couple of hours of frenzied trading over the last week. For the most part, we've been zigzagging in a choppy, sideways dance until a sudden surge two days ago catapulted the market beyond the 5000 mark, leaving us hanging in suspense, much like every cliffhanger before it.
Imagine we're climbing a staircase: The March S&P 500 Futures hovered around the 4800 step, taking a moment to catch our breath without straying too far. Then, with a determined stride, we ascended from 4850 to 4950, only to now be eyeing the next landing at 5020 with anticipation.
Despite flirting with the wild predictions of Monday's market oracle, our journey has been marked by a surprising calm, climbing steadily with the grace of a cat stalking its prey. The plot twist today? The Russell index, which decided to leap by an impressive 1.4%, set the stage for some intriguing developments I'll be diving into shortly.
Looking back on Thursday’s Action
The stock market had a strong day on Thursday. The Russell 2000 outshone other indices throughout the day, ending up 1.4% higher. The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average mostly hovered around their previous day's closing levels but managed to show some resilience. The S&P 500 cash even briefly surpassed the 5,000 mark, reaching an intraday high of 5,000.40, before closing just below this milestone.
The market experienced minimal selling pressure, which, against the backdrop of some investors expecting a pullback, acted as a catalyst for further gains. On both the NYSE and Nasdaq, stocks that advanced significantly outnumbered those that declined, with a ratio of roughly 5-to-2. However, most of the market experienced only modest gains. The Invesco S&P 500 Equal Weight ETF (RSP) ended the day 0.2% higher.
Significant movements were primarily seen in individual stocks that released earnings reports since Wednesday, receiving mixed reactions. Arm Holdings (ARM 113.89, +36.88, +47.9%) surged nearly 50% following its earnings announcement, while Walt Disney (DIS 110.54, +11.40, +11.5%) also saw a notable increase after reporting favorable quarterly results. Conversely, PayPal (PYPL 56.13, -7.11, -11.2%) experienced a decline after issuing guidance below market expectations.
Among the S&P 500 sectors, nine out of eleven moved less than 0.6% in either direction. The exceptions were the energy sector, which climbed 1.1% due to an increase in oil prices ($76.24/bbl, +2.46, +3.3%), and the utilities sector, which fell by 0.8%.
Treasuries closed lower despite a strong $25 billion 30-year bond offering, following the favorable reception of this week's $54 billion 3-year note auction and $42 billion 10-year note auction. The yield on the 10-year note increased by six basis points to 4.17%, and the yield on the 2-year note rose by three basis points to 4.45%.
This price action was partially a reaction to this morning's release of the weekly jobless claims report, which showed a decrease in the number of claims. This reflects the market's emerging view that the Fed may stay restrictive for longer.
Reviewing Thursday's economic data:
Weekly Initial Claims are 218K (KR Forecast Review consensus is 218K), which was previously revised to 227K from 224K. Weekly Continuing Claims are 1.871 million, which was previously revised to 1.894 million from 1.898 million.
The key insight from the report is the sustained low level of initial claims, which indicates that the economy is not experiencing the strain of a significant decline in demand.
- December Wholesale Inventories 0.4% (KR Forecast Review consensus 0.4%); Previous was revised to -0.4% from -0.2%. Financial Disclaimer for "The Kendall Report"
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