Investment Commentary –February 6th, 2018

Year to Date Market Indices as of Market Close February 6th, 2018
Dow 24912 (0.78%)
S&P 2,695 (0.81%)
NASDAQ 7,115 (3.08%)
Gold $1,326 (2.39%)
OIL $63.92 (6.75%)
US 10Y Treasury 2.804 (39.38%)
Barclay Bond Aggregate (-1.47%)

U.S. stocks snap selling spree to close higher in volatile trading

The U.S. stock market halted its death spiral to close higher Tuesday after a wild day of trading that saw the Dow ricocheting more than 1,000 points, underscoring a new regime of volatility on Wall Street.

The turnaround, which follows on the heels of the blue-chip index’s worst one-day point decline on Monday, helped to return key benchmarks back to positive territory for the year.
How did the main benchmarks fare?

The Dow Jones Industrial Average DJIA, +2.33% gained 567.02 points, or 2.3%, to 24,912.77, after falling 567 points at the open. The Dow’s rally was its best daily percentage gain since January 2016.

The S&P 500 index SPX, +1.74% rose 46.20 points, or 1.7%, to 2,695.14 and the Nasdaq Composite Index COMP, +2.13% climbed 148.36 points, or 2.1%, to 7,115.88.

In Monday’s brutal session, the Dow plunged nearly 1,600 pints at its lowest, as investors appeared to panic out of stocks. The index finished down 1,175.21 points, or 4.6%, to 24,345.75, marking its biggest one-day point drop ever. The S&P 500 dropped 113.19 points, or 4.1%, to 2,648.94. Before Monday, it had enjoyed the longest stretch without a 5% pullback in 20 years, but is now down more than 5% from its all-time intraday high of 2,872.87 on Jan. 26.

Around the web

Wage impact

One factor that weighed on bond prices on Friday was January’s sharp increase in wages, which climbed at the fastest pace since 2009. That gain helped fuel concerns that a tightening labor market could spur inflation. Friday’s jobs report also showed steady employment growth in January, with 200,000 jobs added; unemployment was unchanged at 4.1%.

Rough start

After falling 177 points on Monday, the Dow dropped another 362 points on Tuesday, the index’s biggest daily decline since May 2017. Tuesday’s sell-off was broad, as factors such as rising bond yields and growing oil production weighed on shares of everything from energy companies to financial services firms.

Yellen’s finale

Janet Yellen’s final meeting as chair of the U.S. Federal Reserve ended with little drama, as the Fed kept interest rates unchanged and offered few clues about any changes in the pace of interest-rate increases. With Yellen’s exit, incoming Chairman Jerome Powell will lead the next policy meeting, scheduled for March 20–21.

Upcoming events: Wednesday
U.S. Federal Reserve

Past week’s winners: None

Past week’s worst laggards: Healthcare, Industrial Goods, and Financials

Other Notable Indices (YTD)

Russell 2000 (small caps) -1.79
EAFE International -1.41
EAFE Emerging Markets 1.53%
Shiller Cape US (Annuity) 1.21%

The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.