The beat goes on, but a little less intensely so far today. Though stocks enjoyed more overnight gains as China announced tariff cuts and overseas markets rose, it looks like the parabolic rally of the last two days is slowing down.
That’s not too surprising. Major indices are at record highs, and Tuesday and Wednesday’s kind of gains aren’t easy to sustain. We might need some new catalysts to keep the party hopping, and the China tariff news today is nice but not unexpected. Tesla Inc /zigman2/quotes/203558040/composite TSLA +3.80% , which helped spark things earlier this week, got slammed yesterday and is down again in pre-market trading.
Following the bounce yesterday, attention could turn away from earnings and toward tomorrow’s monthly payrolls data. Analysts generally anticipate a slight improvement in job and wage growth for January. The average analyst estimate ahead of Friday’s report is for job growth of 164,000 in January, according to Briefing.com, up a bit from December’s lukewarm 145,000. Some analysts think growth could top 170,000. We’ll see.
Analysts also expect wages to climb a more solid 0.3% in January after rising just 0.1% in December. Keep an eye on year-over-year wage growth, which has been coming down from last year’s long stretch of 3% or higher and was only 2.9% last time out. That’s not too shabby because it still outpaces inflation, but it would be good to see more money hitting the average person’s wallet.
Weekly jobless claims edged lower to just 202,000, according to data this morning. U.S. productivity rose 1.4% in Q4, below the expected 1.6%.
Hopes for progress fighting the coronavirus probably played a big role in yesterday’s recovery, and so did word from some high-profile economists that the virus might not have a big impact on the economy. A big comeback in crude prices, sometimes seen as a canary in the coal mine for world economic demand, also helped propel stocks.
The 10-year Treasury yield rose all the way back to nearly 1.65% on Wednesday before dipping to 1.63% early today. It could be an important indicator to watch Thursday for more insight on the path forward for stocks. If it climbs back above old technical support at 1.7% and into the range between 1.7% and 1.95% that it occupied for many weeks prior to last month, maybe that sends a signal that investors have more confidence in the U.S. economy. The challenge remains low yields overseas, where the German bund is way under water at negative 0.37%.
Crude and gold delivered small gains ahead of Thursday’s open, and volatility eased even further. The Cboe Volatility Index (indexcboe:VXS) is below 15 after testing 20 last week.
TSLA—which looks like it’s in the midst of a classic short squeeze—cooled off in a big way Wednesday, but almost everything else continued to sizzle as coronarvirus fears eased.
The warmth extended to some sectors that had a rough time so far this year, including Energy and Health Care. The fact that crude oil got its head back above $50 a barrel again Wednesday helped some of the big energy firms, while voting in Iowa appeared to give a helping hand to Health Care, especially some of the providers.
This isn’t a political column, but we have to consider politics in the case of Health Care yesterday. The lack of a clear winner in the Iowa caucuses is one of the things that might have helped the sector. Some expected Sen. Bernie Sanders to win, and he’s talked about replacing private health coverage. Now experts watching the Health Care space say the sector could be helped if someone else emerges and doesn’t sound as threatening.
Strong earnings from Humana Inc /zigman2/quotes/203095337/composite HUM +1.32% appeared to be another bullish development for Health Care, and some analysts raised their price targets for the company. Lately, the entire sector had been running in the mud, with almost any good news met with resistance. That didn’t happen Wednesday.
A few big companies saw their stocks take a beating yesterday as investors reacted to earnings and forecasts. Walt Disney Co /zigman2/quotes/203410047/composite DIS +4.50% , Ford Motor Company /zigman2/quotes/208911460/composite F +6.76% , and Merck & Co, Inc. /zigman2/quotes/209956077/composite MRK +1.26% gave up ground, and Nike, Inc. /zigman2/quotes/203439053/composite NKE +1.23% also got clipped, like DIS, by China demand worries. General Motors Company /zigman2/quotes/205226835/composite GM +3.84% moved higher.
On the positive side, Twitter Inc /zigman2/quotes/203180645/composite TWTR -0.34% is up big this morning after the company missed analysts’ earnings estimates but reported a bigger than expected gain in user numbers.
After the closing bell today come earnings from Activision Blizzard, Inc. /zigman2/quotes/200717283/composite ATVI -0.23% and Uber Technologies Inc. /zigman2/quotes/211348248/composite UBER +1.71% , both of which might be interesting to check. Barron’s said ATVI investors could key in on adjusted revenue from both Call of Duty mobile and console releases and World of Warcraft Classic.
Though TSLA is in reverse, another big company’s shares enjoyed a meteoric rise Wednesday. Biogen Inc /zigman2/quotes/201531540/composite BIIB +0.04% rose more than 17% after getting a favorable patent decision for a multiple sclerosis drug. The Nasdaq Biotechnology Index rose more than 2.5% Wednesday, helped by BIIB.