U.S. equities rebounded from recent weakness on Tuesday as buyers saved the Dow Jones Industrial Average from breaking down below its 50-day moving average. Bulls are being encouraged by some strong economic data (consumer confidence is off the charts) and dovish comments from Federal Reserve Board Chair Janet Yellen (that there remains pockets of high unemployment).
Overall, that was enough to juice financials higher and thus, drag the rest of the market higher in sympathy and avoid the longest losing streak since 1978.
In the end, the Dow Jones gained 0.7%, the S&P 500 gained 0.7%, the Nasdaq Composite gained 0.6% and the Russell 2000 gained 0.7%. The Dow, the S&P 500, and the Russell 2000 all gained exactly 0.73% each — suggestive of machine buying instead of actual humans — as large-caps snapped an eight-day losing streak.
Treasury bonds were weaker, the dollar was stronger, gold was little changed and oil rallied 1.3%. Financials led the way with a 1.4% gain, while healthcare was the laggard, up just 0.1%.
Troubled mall retailer Sears Holding Corp (NASDAQ:SHLD) surged nearly 20% after an institutional investor increased their stake with a purchase of 286k shares. Darden Restaurants, Inc. (NYSE:DRI) gained 9.3% on better-than-expected quarterly results on better comps at Olive Garden. And Tesla Inc (NASDAQ:TSLA) gained 2.7% on institutional buying.
On the downside, Snap Inc (NYSE:SNAP) lost 6.8% on reports competitor Facebook Inc (NASDAQ:FB) is rolling out several features that move in on its territory including disappearing photos in Facebook Direct.
Stepping back, the medium-term trend remains to the downside amid growing concerns President Trump and Congressional Republicans will be unable to push a tax reform bill through — just like they failed to push through a healthcare reform package to a vote last week.
The latest political headlines are that Trump could move to the center and court moderate Democrats with a larger middle-class tax cut and infrastructure spending in exchange for less relief in corporate taxes.
Don’t forget also that we’re heading into a seasonally weak period of the year as the calendar prepares to flip to April (“Sell in May”). And we are also on the cusp of the end of the first quarter, which means the reporting of corporate earnings growth (which remain tepid) and GDP growth (which is expected to come in below 1%).
All of this “hard data” should rattle investors out of their speculative fever dream driven by Trump’s election.
Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. A two-week and four-week free trial offer has been extended to Investorplace readers. Redeem by clicking the links above.