Get The Ticker Tape delivered right to your inbox.

X

Stock Market Improves But Braces for More Potential Wild Swings

Print
January 5, 2016

U.S. stocks twisted between small gains and losses as Tuesday’s session progressed, a day after Monday’s slide marked the worst start to a trading year in about a decade, according to market historians.

Stronger-than-expected auto sales brought some lift to the broader stock market, although energy shares remained under selling pressure.

The S&P 500 (SPX) closed down 1.5% Monday (figure 1), with select equity futures benchmarks down as much as 2%. But SPX did finish off its worst levels Monday and overnight futures action returned to the little-changed mark—all signs of potential continued volatility as traders sort out global developments against expectations for improving U.S. economic data (see the full economic schedule below).

Global markets, which were tipped into the early-week slide after bearish Chinese factory data, earned little immediate traction from China’s efforts Tuesday to inject cash into the financial system. Geopolitical tensions between Iran and Saudi Arabia have kept up Wall Street’s concerned attention on global economic stability and already volatile energy markets to kick off a year that many industry economists expect to result in more Federal Reserve interest rate hikes.

SPX stock chart

FIGURE 1: ROCKY START?

The S&P 500 (SPX), plotted here on the thinkorswim® platform, tested the psychologically significant 2000 line on Monday before a finish off that low. Data source: Standard & Poor’s. For illustrative purposes only. Past performance does not guarantee future results.

Technically Speaking. Chartists will likely point to downside support at SPX 1989 as the next potential major test for this broad-market measure. Shy of that, Monday’s finish above the 2000 line pierced earlier could be declared a minor victory for the bulls as that line tends to hold psychological significance for the stock market. As for the CBOE Volatility Index (VIX), which tends to move opposite the SPX, it rose some 14% on Monday; resistance lies in wait near 27.

Pharma Focus. Eli Lilly & Co. (LLY) drops in early action Tuesday, shaving some of its over 19% 12-month advance. Shares fall after the drug concern said it expects revenue to range from $20.2 billion to $20.7 billion for the year, and adjusted per-share earnings to range from $3.45 to $3.55. The FactSet survey of analysts who cover the stock had called for EPS of $3.65 and revenue of $21.6 billion. Meanwhile, Gilead Sciences (GILD) could be active in Tuesday trading after it earned an FDA priority review of its experimental hepatitis C combination drug.

Deal Buzz. Fairchild Semiconductor (FCS) says it received an unsolicited bid from China Microelectronics Limited and Hua Capital Management Co. to buy the company for $21.70 per share in cash, according to financial press reports. The reports note Fairchild’s comment that this latest offer could be superior to the one on the table from On Semiconductor (ON).

Note: This post updates early market action.

Good Trading,

JJ

@TDAJJKinahan

economic report calendar

FIGURE 2: ECONOMIC AGENDA.

This week’s U.S. economic report calendar. Source: Briefing.com.

Daily Swim Lessons: Dive In

Learn from platform pros with Swim LessonsSM on the thinkorswim® platform. Wednesday: Weekly Options

NC
Scroll to Top