The stock market took investors for a thrill ride on Wednesday, as trade matters triggered some roller-coaster action. In the end, the stock market finished on an incline that slowed the feeling of losing one's stomach that hit at the open when the major indices went downhill fast.
The intraday swing from low to high for the Dow, Nasdaq, and S&P 500 was 3.3%, 3.6%, and 3.0%, respectively. Those three indices closed Wednesday up 1.0%, 1.5%, and 1.2%, respectively.
The stock market looks ready to keep climbing this morning. The S&P futures are up 14 points and are trading 0.7% above fair value.
Some of that is owed to carryover momentum and the good feelings generated by the stock market's ability to bounce back from large losses. Another helpful influence has been the jump in Facebook (FB) shares following a conference call Mark Zuckerberg held with reporters pertaining to the much publicized data breach.
FB is up 3.8% in pre-market trading, which is generating a positive buy-the-dip buzz for other mega-cap tech stocks.
The ability to bounce back from large losses yesterday, though, has fostered a belief among some participants that the worst of the latest down leg, which dropped the S&P 500 below its 200-day moving average and all three indices into correction territory (i.e. down 10%+ from high), is behind the market.
With yesterday's rebound, the S&P 500 is back trading above its 200-day moving average (2593), which is apt to be a point of comfort for technical traders that could spur a renewed inclination to buy on dips for the time being than sell into strength.
The latter can't be taken for granted, however, knowing this is a headline-driven market and that it doesn't take much these days to shake sentiment.
The reason that is the case doesn't have as much to do with trade as it does with ruminations about the path of interest rates and the assumption, based on chatter from the Fed, that the path of least resistance for rates is to the upside.
On a related note, Jamie Dimon acknowledged in his annual letter to JPMorgan Chase (JPM) shareholders that the market could be underestimating the number of times the Fed raises rates this year.
We digress, yet the specter of rising interest rates is an extremely important element one can't forget as talk of trade wars dominates the headlines.
Speaking of trade, the February Trade Balance Report didn't necessarily help temper trade deficit concerns. It showed a widening in the deficit to $57.6 billion (Briefing.com consensus -$56.7 billion) from $56.7 billion in January. The trade deficit is the largest it has been since October 2008.
The upshot is that there was an increase in both exports (+$3.5 billion) and imports (+$4.4 billion) in February, which is a positive sign for the global economy. The root of the hot-button issue right now, though, is that imports increased more than exports.
The key takeaway from the report is twofold: (1) it underscores that trade will be a drag on Q1 GDP growth and (2) it will continue to fan the rhetorical flames regrading trade imbalances.
The initial claims report, meanwhile, was weaker than expected. Initial claims for the week ending March 31 increased by 24,000 to 242,000 (Briefing.com consensus 225,000). That disappointment will be washed away as some normal volatility in a data series that has been persistently encouraging. To that end, this is the 161st straight week initial claims have held below 300,000.
Continuing claims for the week ending March 24 dropped by 64,000 to 1.808 million. That is the lowest level of continuing claims since December 29, 1973.