Market’s Spectacular Rebound!

February 7, 2018.

The market came back with a fury after the S&P 500 and the Dow suffered their largest one-day drops in over 6 years. Volatility reared its head to an extreme, stocks ricocheting like stray bullets. There was a 1,100 point difference between the high and low yesterday on the blue-chip Dow. The question on everyone’s mind is obvious: “What’s gonna happen tomorrow?” and frankly put, it’s anyone’s guess. The wild intraday movements came on the heels of long dormant stretches where volatility was subdued, where the market traded up from one month to the next, no end in sight. The way BNY Mellon Investment Management’s global investment branch put it: “What we think happened is that price velocity on the upside got completely disconnected from how markets behave. It’s a little like what happened with bitcoin, though not to the same extreme. There’s a coherence of price action and when you get 440 days of trading without a 1 percent down day, you’re at risk for a correction.” And that’s exactly what there was, this pollyannic, happy-go-lucky attitude that the bulls were invincible, but Monday, the bears had their day in the sun!

The market’s fear gauge, the VIX, has been all the more confusing, responding on Monday to a degree 2.5 times the historical average for a drop of the size we saw on the S&P 500. What we can say about yesterday, though, is that the market extricated itself from its death spiral and got itself back on its feet rather rapidly.

Market Summary: The Dow rose 567 points or 2.3% – after having fallen precipitously by 567 points at the open. While the Dow saw its best daily percentage gain since Jan. ’16, the S&P 500 climbed 1.7%. The tech heavy NASDAQ gained 2.1%.

J.P. Morgan global head of Macro Quantitative and Derivatives Strategy team, Marko Kolanovic, commented,  “Rapid selloffs, such as the one today, can also be followed by market bounce-backs as liquidity gets exhausted by programmatic selling. With next year’s P/E (price/earning) on the S&P 500 now below 16, further positive impacts of tax reform and stabilization of bond yields…we think that the ongoing market selloff ultimately presents a buying opportunity.”

Yesterday, one of the most noteworthy stocks was General Motors, which tacked on just under 6% after releasing stellar Q4 numbers. Its competitor, Ford (F), climbed 5.1%.

KeyBanc Capital upgraded Micron Technology to overweight from sector weight, sending the former up by 11%. Concerns about Apple weakness sent Cirrus Logic off 3.3%. Allergan rose 2%, rising the wave of its positive results and a positive late stage clinical trial for its migraine medication.

In today’s Economic Calendar, be primed for the address of Fed N.Y. President, William Dudley, at 8:30, along with oil inventory numbers at 10:30.

Wednesday’s Hot Stocks: GM, SNAP, DIS, CMG, GILD, AKAM

Have a great trading day!

New York Strategy Swing