US Stock Market Volatility Suddenly Makes a Comeback This Week

Matty-Sways

The Market has to contend with the coronavirus, Iowa Caucus, weak data coming out of China.

U.S. stocks rose Tuesday on expectations that global growth will prove resilient as fiscal and monetary policies blunt the impact of the coronavirus outbreak on China’s economy. 

The DJIA jumped 450 points, or 1.6%, returning to positive territory for the year after deep losses Friday. At its top, the blue-chip index was up slightly more than 500 points.

The S&P 500 advanced 1.6%, and the tech-heavy Nasdaq Composite added 2%, putting it on pace for another new record close.

McKesson shares gained 4.2% after the drug distributor reported adjusted earnings that beat analyst expectations. Shares of Alphabet fell 3.1% after Google’s parent company reported disappointing performance in its core advertising business, with fourth-quarter operating income and revenue missing consensus estimates. Among European equities, oil giant BP rose 4.2% after a measure of profit for the fourth quarter beat analysts’ expectations.

Tesla shares are surging at the fastest pace since 2013. It is testing the resolve of short-sellers who have made the electric-car maker one of the most bet-against companies in financial markets. It seems that the shorts are losing this round as some of these gains are shorts covering. The stock is reminding investors of the steadily nonprofit generating company named Amazon that shot to the moon for years before generating any profits. 

Tuesday’s gains marked the fourth time the S&P 500 has moved by more than 1% in seven trading sessions. (Prior to those 4 it hadn't happened in a single session since October) The upsurge in volatility follows several months of a strange calmness in the market as investors stayed on the sidelines. After great 2019 returns (it closed out the year up 29%) No some investors are waiting for the overpriced market to correct. Headlines out of Washington, Iran, the impeachment, and China have had an influential impact on the volatility of the markets. 

“Today is really emblematic of what we’ve seen, this ebb and flow between headlines and fears,” said Mark Hackett, chief of investment research at Nationwide.

Fresh data in recent days showing that global manufacturing appeared to be steadying. In the U.S., a widely followed gauge Monday showed that the manufacturing sector in January had returned to growth, and data Tuesday showed that new orders for manufactured goods rose in December at the fastest pace in more than a year.

Meanwhile, the People’s Bank of China offered funds in the overnight market for a second consecutive day, as it seeks to encourage lending to businesses that are struggling to stay open. The reserved Chinese government has barred travel and asked companies to halt operations as it tries to stop the spread of the deadly virus that has killed more than 400 people and infected more than 20,000.

“There has been some investor psychology being built up over the last 10 years that the central banks will do whatever they need to,” said Peter Garnry, head of equity strategy at Saxo Bank. “That is what the equity market is at least betting on. Whether that comes through, we’ll have to see.” Again, no comment on the ten years of quantitative easing, low-interest rates, and the two stimulus plans that the Fed will one day have to unwind. 

“Coming off a year in which the equity markets were as strong as they were, you had to expect that at some point the market was going to need a little bit of a breather,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. “You can’t expect the markets to provide the types of return they did in 2019 indefinitely.”

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