Tuesday, Feb 9, 2016 10:35 am
U.S. equities traded mostly higher on Tuesday as U.S. oil prices reversed and investors looked ahead to Fed Chair Janet Yellen’s testimony.
“There’es a real likelihood that she comes out and acknowledges the weakness in the economy here and overseas,” said Robert Pavlik, chief market strategist at Boston Private Wealth. “I think that will be taken by the market as a positive.”
Yellen is scheduled to testify before Congress on Wednesday and Thursday.
“There could be some growing optimism ahead of Janet Yellen’s testimony. She has in the past had the ability to push markets higher, although that’s diminished in recent years,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab.
Investors also kept an eye on oil prices, as WTI futures rose 0.6 percent, or 18 cents, to trade at $29.87 a barrel in choppy trading. Earlier, oil prices fell about 1 percent as investors digested news that the International Energy Agency said that demand for oil will “ease back considerably” in 2016.
The Dow Jones industrial average fell over 100 points shortly after the open, but turned positive as Home Depot gained about 2.5 percent.
The S&P 500 dropped nearly 1 percent at the open, led lower by energy and financials, before holding about 0.2 percent higher.
The Nasdaq composite opened more than 1 percent lower, but reversed losses as the iShares Nasdaq Biotechnology ETF gained percent.
“What this suggests is a near-term bounce,” said Adam Sarhan, CEO of Sarhan Capital. “I think yesterday was a small but substantial change in the near-term trend.”
Earlier, stocks were weighed down by rising global growth fears and a weak overseas backdrop.
“Japan fell 5.4 percent largely in part [because] two of its biggest banks fell 9 percent,” said Peter Boockvar, chief market analyst at The Lindsey Group. “People thought it we’d have a quiet week because China was closed; that’s obviously not the case.”
European equities followed Asian stocks lower, with the pan-European STOXX 600 index dropping over 1 percent.
U.S. futures seesawed on Tuesday, with Dow futures failing to hold initial gains and dropping more than 150 points.
“We certainly know the path of least resistance is lower,” said Art Hogan, chief market strategist at Wunderlich Securities.
“At the beginning of this sell-off, it was about oil and China demand,” he said. ” Now we’re seeing a re-writing of valuations in other spaces, like tech.”
The technology sector in the S&P has dropped more than 4.5 percent in the last month.
The three major U.S. indexes fell on Monday, but managed to pare losses ahead of the close.
Treasurys around the world have staged a significant rally recently, and continued their upward trajectory on Tuesday.
“The bond market is flashing a recession,” Peter Cardillo, chief market economist at First Standard Financial, said.
U.S. 10-year yields fell to trade at 1.70 percent, after briefly dipping below that level. In Japan, 10-year yields turned negative for the first time ever.
On the data front, investors digested U.S. wholesale inventories data, which showed inventoried declined 0.1 percent in December, less than expected.
Coca-Cola, Viacom and Wendy’s reported quarterly earnings before the open, with Disney results due after the bell.
“We got earnings that were good, but not good enough to move us higher,” Wunderlich’s Hogan said.
On tap this week:
Earnings: Disney, First Data, Panera Bread, Western Union, Solar City, Wellcare Health, Sanofi
10 a.m.: Wholesale trade; JOLTs
1 p.m.: 3-year note auction
10 a.m.: Fed Chair Janet Yellen testifies before House Committee on Financial Services
1 p.m.: 10-year note auction
1:30 p.m.: San Francisco Fed John Williams on health and the economy
2 p.m.: Federal budget
8:30 a.m.: Initial claims
10 a.m.: Fed Chair Janet Yellen testifies before Senate Banking Committee
1 p.m.: 30-year bond auction
Earnings: Red Robin Gourmet Burgers, Calpine, Buckeye Partners, Interpublic, Ventas, Brookfield Asset Management
8:30 a.m.: Retail sales; import prices
10 a.m.: Consumer sentiment; business inventories; New York Fed President William Dudley speaks on household debt and credit
*Planner subject to change.