On Thursday, stocks recovered from the impact of a Federal Reserve statement that appeared to indicate that it was prepared to increase interest rates at a faster pace than the market expected.
The Dow Jones Industrial Average rose 0.3%, the S&P 500 gained 0.4%, the Nasdaq gained 0.4% and the Russell 2000 gained 0.8%.
The S&P’s financial sector led with a 1% gain due to investors positioning in stocks in the banking sector that would benefit from higher interest rates. But while the financial stocks gained, investors sold bonds and shares of interest-bearing stocks of the real-estate sector (-0.7%). Gold and mining shares also fell.
The Wall Street Journal Dollar Index, a measure of the dollar vs. a basket of currencies rose 0.8% to a 14-year high. The euro fell 1.2% to $1.04. And the rise of the buck had a negative impact on crude oil. The WTI January contract fell to $50.90 per barrel, down 0.3%, but rallied from its low of the day when some members of OPEC were reported to have informed customers of a cut in production.
At the close, the Dow Jones Industrial Average gained 60 points at 19,852, the S&P 500 rose 9 at 2,262, the Nasdaq gained 20 points, closing at 5,457, and the Russell 2000 closed at 1,366, up 10 points. The NYSE’s primary exchange traded over 1 billion shares with total volume of over 4 billion shares. The Nasdaq crossed 2 billion shares. On the Big Board and the Nasdaq, advancers outpaced decliners by 1.5-to-1. Blocks on the NYSE increased to 7,229 from 7,195 on Wednesday.
The Dow industrials recovered 60 of the 119 points lost on Wednesday’s decline. The recovery was accompanied by very high volume, and the MACD indicator remained in positive territory. The 20,000 level, however, remains a psychological barrier. (See Conclusion for its significance.)
Conclusion: Raymond James technician Andrew Adams noted the insignificance of the 20,000 number in yesterday’s Morning Tack with a quote from Bespoke Investment Group: “When people were focused on Dow 10,000 in 1999, 1,000 points represented 10% of the index. At 20,000, though, 1,000 points only represents 5%.” Then Adams correctly pointed out that the “Dow JUST hit 19,000 on November 22, 2016–less than one month ago!” Why is it such a big surprise that another 1,000-point target is coming so soon?
A jump of 1,000 points is not what it used to be. But in some investors’ minds, 20,000 is a psychological barrier, and the collective minds of so many investors can result in a powerful force.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
