On Monday the CBOE Volatility Index, or VIX, fell 24% as investors sold gold and bonds in favor of higher-risk investments. The French election was credited with the big gains on Wall Street in spite of one leading politician, Marine Le Pen’s, negative position on the European Union. But opinion polls showed that Le Pen would come in second against the National Front leader, Emmanuel Macron, in a head-to-head election.
According to The Wall Street Journal, banks, both domestic and international, would be big winners with the larger institutions benefitting most. Yesterday’s advances by the large banks confirmed that opinion: JP Morgan Chase & Co. (NYSE:JPM) rose 3.8% and Goldman Sachs Group Inc (NYSE:GS) gained 3.2%.
Safety-net investments like gold and bonds fell sharply. Gold fell 0.9% to $1,276 per ounce and the benchmark U.S. 10-year Treasury note’s yield rose as its price declined.
President Donald Trump ordered aides to increase the pace of work on the draft of a new tax plan. That, too, had a positive impact on stocks.
At the close the Dow Jones Industrial Average rose 216 points, closing at 20,764, the S&P 500 gained 25 points at 2,375, the Nasdaq gained a whopping 73 points at 5,984, and the Russell 2000 closed at 1,398 for a gain of 18. The NYSE’s primary exchange traded 670 million shares with total volume of 3.6 billion shares. The Nasdaq crossed 1.8 billion shares. On the Big Board, advancers outpaced decliners by 2.4-to-1, and on the Nasdaq, advancers led by 2.6-to-1. Blocks on the NYSE increased by just10 above 7,340 on Friday to 7,350.
In one day, the inverse indicator fell 24% to end close to the VIX’s low for the year — a very bullish indication for stocks.
The S&P 500 didn’t miss a beat as banks and other internationals jumped due to the election results in France. But is this the real thing or just another fake out?
Conclusion: Neither high volume nor strong bullish breadth support a break-away gap. Buying stocks on geopolitical happenings has not proven to be consistently successful. My reading is that we may challenge the April reversal high and perhaps even the S&P’s closing high at 2,395 made on March 1, but unless breadth and volume increase, I suggest adding to cash, a move that is seldom wrong.
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.
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