(Friday Pre-Market) A rebound in oil overnight and stronger-than-expected retail sales helped stocks track a moderately higher open, but the question is whether the market can continue to build on Thursday’s late rally.
Retail sales, which came in up 0.2% in January compared to industry analysts’ estimate of 0.1%, might help. Investors will wade through more data later Friday, notably consumer sentiment and business inventories.
Even as investors examined retail sales data for any kind of improvement in consumer sentiment, they also had their minds on Thursday’s dramatic U.S. session, which at one point saw the S&P 500 (SPX) break under its Jan. 20 low of 1,812.29, hitting 1,810.01 (figure 1). Late Thursday, stocks roared back, making up nearly half the ground they had lost at session lows after the Wall Street Journal reported that OPEC might agree to cooperate with other countries to cut oil production. The rally allowed the S&P 500 to close above key support at 1,820, giving the market something to build on from a technical perspective Friday. The question is whether it can continue to hold that level.
Continued strength in the oil market helped lift European stocks early Friday, as did a relief rally in shares of battered European banks. Stronger European performance gave U.S. stocks a boost. Investors continue to pile into bonds and gold (which set a new intraday one-year high above $1,260 an ounce Thursday) as they seek safety amid the continued stock market rout,. However, bond yields climbed from Thursday’s lows, with the 10-year yield recently at 1.68%. Investors are looking to see if it can break the key 1.7% level today, and debate continues about whether U.S. rates are too high compared with rates around the world.
The U.S. banking sector, on the other hand, took a dive on Thursday, and investors will watch closely to see how banking stocks perform Friday. Some of the big financial names whose stocks swooned included JPMorgan Chase (JPM), Wells Fargo (WFC), Citigroup (C,) and Bank of America (BAC). Lower interest rates put pressure on the banks’ net interest margins.
Jet Maker’s Stock Plunges: Shares of Boeing (BA) fell $7.92, or 6.8%, to a more than two-year low of $108.44 on Thursday. The Dow component—a closely watched manufacturer—tumbled after Bloomberg News reported that the maker of jet aircraft is having its accounting investigated by the U.S. Securities and Exchange Commission. Boeing and the SEC declined to comment to Bloomberg on the report.
Volatility Surges To Six-Month High: The CBOE Volatility Index (VIX) advanced double digits in percentage terms midway through Thursday’s session before giving up some ground. The closely watched measure of market volatility still finished the day up 7% at 28.14, the highest level since last August.
Ships in the Night: On Monday, the mainland Chinese stock market will open after a week off for the New Year. However, the U.S. stock market will be closed Monday for the President’s Day holiday, re-opening Tuesday, when the two markets will trade again on the same day for the first time since Feb. 5.
Volatility Leave You Spinning?
TD Ameritrade’s JJ Kinahan and Craig Laffman recap volatility drivers in stocks and fixed income, covering the potential Fed impact, on February 17, at 9 a.m. ET.