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Equity Markets Are Rebounding, The Circuit Breakers Sound Alarm Again, Expect Volatility In Friday 13th Trading

Equities rebound on hopes for stimulus from the U.S. Federal Government.
Thomas Hughes
Shifting Undercurrents In The Us Stock Market

Equities Rebound On Friday the 13th

The U.S. equities are in rebound mode once again. Traders are scooping up bargain stocks in earnest even though bear market conditions have set in. Yesterday’s action saw the largest single-day declines in over a decade and left the S&P 500 down more than 25%. Today’s action has the Dow Jones, S&P 500 and NASDAQ up 5.3% to 5.65% but traders should expect volatility. Today is Friday the 13th and there has been a full moon, two triggers for market psychology that should not be discounted.

Early action saw the futures indicating a loss of nearly 700 points for the Dow. Positive news from Capitol Hill sparked a reversal that sent the blue-chip index up more than 1,100 points. The rebound was so strong it triggered the market circuit breakers for the third time this week but this time to the upside. Yesterday, talks between Democrats and Republicans appeared to break down on the subject of economic stimulus. This morning, the word is most differences have been resolved and a deal is close at hand. When and if announced such a deal could send the indices up to trigger the second circuit break at 7%.

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Stimulus Actions Are Spreading Faster Than The Virus

The number of cases continues to grow globally although China appears to have peaked. Apple reports it is opening 42 of its branded stores, a sign the threat is largely passed. In the meantime, central banks around the world are scrambling to shore up financial systems to aid economic activity during the crisis.

The FOMC increased its repo operations on Thursday, today word from the Bank of Norway and Bank of Korea offered further support for battered markets. The Bank of Norway cut its key rate by 50 basis points while the Bank of Korea indicates it may do the same.

In the U.S., the signs of an economic slowdown are growing. What investors need to remember is the slowdown is only occurring in certain industries. Travel and tourism remain the most heavily impacted and that impact is growing. The NBA, NCAA, and NHL have all canceled seasons and major events the would normally drive in billions in consumer spending.

Earnings Season Mostly Over

The 4th quarter reporting season is all but over. Today’s news includes a report from Oracle that shows business was still strong in the first two months of 2020. The company beat on the top and bottom line due to strength in the cloud segment. Shares are up 10.5% in early trading. Overstock.com is also up sharply in early trading, +14%, after it reported solid earnings and outlook. Gap Stores, another retailer in transition, beat top and bottom-line earnings, provided positive guidance, and saw shares rise 7.5%.

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