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Market Update

Are We There Yet? All Indexes Are Rallying for Fresh Peaks

April 19, 2016

(Tuesday Market Open) Whatever. That’s the message the markets seemed to be sending to that esteemed but divergent group of oil honchos who met in Doha on Sunday and failed to reach a pact to put a freeze on oil production. We thought a meltdown might be in the cards, but the markets brushed it all off and continued on their merry way.

All the major indexes are within a 2% of hitting all-time highs. Yes, the zig-zag manner they’re getting there underscores the challenges the markets have faced since August, and particularly since the beginning of the year.

When all was said and done Monday, the Dow Jones Industrials (DJIA) tiptoed back and forth over 18,000 throughout the day before getting bold enough to cross that psychological barrier and stay there at the close—the first time it’s done so since last July.

What a ride it’s been since those January and February breakdowns that left markets muddling in the trenches. The blue-chip index and the S&P 500 (SPX) have both recouped some 15% since Feb. 11, and are sitting comfortably in 2016 peaks. Gold, the go-to safe haven in a down market, also managed to close to the upside. What does that mean? That investors appear to like what they’re seeing in the markets but still want some protection, analysts say.

Earnings front and center Tuesday are some blue-chip components that are buttressing the climb. Johnson & Johnson (JNJ), for one, outpaced Wall Street’s expectations, and noted that though the economy’s growth is slow, the healthcare industry is robust. 

Even still, the company added that results could have been better if sales weren't constrained by the strength of the dollar on all multinationals like it. 

S&P 500


The S&P 500 (SPX), plotted here through Monday on the TD Ameritrade thinkorswim® platform, is reaching for new highs for 2016 again. Data source: Standard & Poor’s. For illustrative purposes only. Past performance does not guarantee future results.

Can We Kiss Oil-and-Stock Ties Ta-Ta? Talk that this strange alliance between oil and stocks has finally met its maker might be premature. The paradoxical correlation of the two rising in tandem has been a head scratcher to many an economist and trader because history, and some academic studies, find few real ties. Oil prices typically rise and fall based on the laws of supply and demand. Stock prices follow corporate earnings for the most part, with a curve ball thrown by the occasional economic blip or outside threat. Why would the two act as a team? There is no definitive answer, except that they did as much as 93% of the time earlier this year, according to market data. And that made it a topic of discussion among traders. But that relationship appears to be waning. Stocks and oil prices turned away from each other again when DJIA closed above a psychological market of 18,000 while oil, which took a beating early on, settled off its worse levels at $39.78.  But they're still up 85%.

Yeah, But Oil’s Up Today: Yes it is and so are the markets. Does that buck the theory that really isn’t a theory? No, some analysts say. Because oil’s climb today is tied to a strike, in day three, in Kuwait, MarketWatch reported. The strike against the government’s efforts to slash wages has already tumbled to 1.1 million barrels a day from the state-owned Kuwait Oil Co.'s typical 3 million a day. Kuwait is a member of the Organization of Petroleum Exporting countries, what we commonly refer to as OPEC. “There is little doubt that the Kuwaiti strike is limiting the slide in prices,” James Williams, energy economist at WTRG Economics, told MarketWatch.

Fed Comment of the Day: Another day, another opinion by a Federal Reserve member. Monday’s comes from Boston Fed President Eric Rosengren, who warned that the futures market is off the mark about when rate hikes might occur. He says U.S. inflation is now "much closer” to the Fed’s goal and that the economy is “fundamentally sound,” according to CNBC. He didn’t say exactly when another move up might come, but reports say he suggested that the door was still open to a June hike. CME Group’s FedWatch, that futures measure, doesn’t even have more than 50% chance of such until November—and then it’s only at 57%.

Good Trading,

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