Markets Stage Impressive Late-Day Recovery

A Win By Any Measure on Wall Street Monday Amid Trade Fears

By any measure, stocks staged an impressive recovery late Monday, as what began as roughly 2% losses across the board were dramatically reduced by the closing bell.  

Market internals continue to impress. The final adv/decl stats settled with 3 stocks advancing for every 4 declining at both the New York Stock Exchange (NYSE) and the NASDAQ Composite (^IXIC) marketplace. While still slightly negative, this was much improved from most of the day, and a sign of market resilience.

The Russell 2000 (^RUT) outperformed for the third consecutive session as it eked out the smallest of gains at +0.95, or +0.1% to 1614.98. The Russell was the only broad market Average to close in the green. It’s an endorsement from investors and signals small caps will benefit from strong economic growth, while remaining isolated from the strength of the U.S. dollar and most trade issues.

The Dow Jones Industrial Average (^DJI) ended the day with a decline of 66 points, or merely -0.3% to 26438.  This was much improved from starting the day with nearly a 500 point deficit, or -1.8%.  While many megs cap multinationals in the (^DJI) are very sensitive to trade issues, Walt Disney Co. (DIS), Chevron Corporation (CVX), UnitedHealth Group Inc (UNH), and McDonald’s Corp (MCD) all settled with solid gains.

Both the S&P 500 (^SPX) and NASDAQ Composite (^IXIC) finished with losses of just less than -0.5%, again much improved from their early morning declines.

The (^SPX) was aided by a positive reversal in oil prices during the day that gave support to the energy sector. Additionally, Occidental Petroleum Corporation (OXY) raising the cash portion of their bid to acquire Anadarko Petroleum Corporation (APC) helped valuations among E&P names, many of which are upper tier components of the S&P 500.

The (^IXIC) was the arguably the most challenged to reverse fortunes on the day. Not only did it begin the day with the largest decline at -2.2% but it’s also the trading home to countless technology companies. That includes the entire semiconductor space, which are highly exposed to the pan Asian economy.

No doubt investors will pay close attention to markets in China overnight.  Although in Shanghai the SSE Composite Index (^SSE) declined -5.5% Monday, it still has YTD gains of greater than +20%. Further market declines in China overnight during Tuesday trading could set the stage for another challenging trading day in the U.S. on Tuesday.