After a churning, volatile session U.S. equities finished Tuesday higher — saving the Nasdaq Composite from its longest losing streak in 31 years.
Overnight stabilization in the Chinese markets boosted U.S. stocks at the open before the grinding weakness in crude oil pushed stocks into the red in mid-day trading.
Once the crude oil pits closed, stocks ramped in the final two hours of trading to finish near their highs.
In the end, the Dow Jones Industrial Average gained 0.7%, the S&P 500 index bounced 0.8%, the Nasdaq wafted up a percent and the Russell 2000 ended the day with a gain of 0.3%.
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Treasury bonds were stronger, the dollar gained, gold fell 0.6% and crude oil lost another 1.9% to close at $30.80 a barrel — pushing deeper into levels not seen since 2003.
Technology stocks led the way with a 1.2% gain, while utilities stocks lost 0.5%. Yoga pants maker Lululemon Athletica inc. (NYSE:LULU) gained 3.8% after increasing fourth-quarter guidance on revenue, earnings per share, and comp-store sales after a stronger-than-expected holiday season.
Meanwhile, Alcoa Inc. (NYSE:AA) lost 9% after kicking off the Q4 earnings season on Monday with a highly finagled earnings beat featuring a large restructuring charge off.
The Shanghai Composite gained 0.2% as Chinese authorities aggressively work to stabilize the yuan and punish offshore short sellers. The rhetoric is ratcheting up as well: Deputy Director Han Jun of the office of Central Financial Work Leading Group fired back at expectations that the yuan would lose 10% or more against the dollar as “ridiculous and impossible.”
On the economic front, the November Job Openings and Labor Turnover Survey confirmed the ongoing health in the labor market despite recent stock market volatility and softness in recent U.S. economic data. The job openings rate increased to 3.7% of total employment.
Philippa Dunne of the Liscio Report notes the number of unemployed persons per opening stands at 1.9, down from 6.8 in July 2009 and nearly returning to the pre-recession level of 1.8 in December 2007.
This increases the odds of another 0.25% interest rate hike from the Federal Reserve at its March meeting — something, if it is going to happen, that will be teased by Fed officials in their upcoming policy announcement on Jan. 27.
Technically, stocks are really bombed out: According to Yardeni Research, only 22% of the stocks in the S&P 500 are above their 200-day moving average and are nearing levels last seen in 2011. A combination of factors, from Fed tightening to weak earnings, high valuations, China turmoil, weak U.S. data, fragility in the bond market, rising bankruptcy risks in the energy sector and the carnage underway in crude continue to weigh.
The team at SentimenTrader notes that the Nasdaq’s eight straight down days through Monday — after nearly hitting a new high before the losing streak — is something that has only happened three other times in the last 40 years.
While further weakness is likely through the rest of 2016, I’m looking to book short side profits including the nearly 400% gain in the Bank of America Corp. (NYSE:BAC) Jan $110 puts held by Edge Pro subscribers since Dec. 17.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
