U.S. stocks mostly moved higher on Thursday, shaking off some nasty currency market volatility as the dollar tumbled on more weak dollar comments from Treasury Secretary Mnuchin, before being rescued late in the session by strong dollar comments from President Trump in Davos. In between, trade partners from Asia to Europe expressed concern that the United States could be indulging in the currency devaluation mercantilism they have long relied upon.
In the end, the Dow Jones Industrial Average gained 0.5%, the S&P 500 gained 0.1%, the Nasdaq Composite lost 0.1% and the Russell 2000 gained 0.1%. Treasury bonds were mixed, gold and crude oil fell and the PowerShares DB US Dollar Index Bullish (NYSEARCA:UUP) ended the day with a 0.1% gain after trading down nearly 1% at the day’s low.
Ford Motor Company (NYSE:F) lost 3.9% and it was the day’s most active issue after reporting better-than-expected quarterly revenues. 3M Co (NYSE:MMM) gained 1.8% in the wake of quarterly results. Airline stocks were hammered with a 3.2% loss in the wake of news about capacity expansion plans feeding fears of a looming price war. Defense names were the leaders, up 2.1%.
Looking ahead, Friday will feature the advance report on Q4 GDP with analysts looking for a 2.9% annualized gain.
Also on the docket are updates on durable goods orders, international trade and inventories. Economic data has actually been disappointing lately, with the Citigroup Economic Surprise Index rolling over since the end of 2017 despite all the hoorah around the GOP’s tax cuts and a strong labor market.
A weak GDP report could draw attention to this trend, making the worst start to a year since 2015.
In a breaking of the long-held tradition of rising stocks and falling volatility, the CBOE Volatility Index (VIX) continues to push higher in defiance of the relentless gains in equity prices. Bank of America Merrill Lynch analysts note that the more typical response would be to see a period of weakness in equity prices resulting from this.
The dynamic seems to be driven, in fact, by an overzealousness in equity call option buyers scrambling to get more exposure to the rising prices in stocks and thus pushing up prices.
Just another indication that this is no normal market and that sentiment is foaming-at-the-mouth bullish.
Check out Serge Berger’s Trade of the Day for Jan. 26.
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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