Stocks Make Huge Rebound After Testing Support
What a day! After the markets were down by -3% at their worst yesterday, they came roaring back with the Nasdaq closing up (0.42%) with the Dow and the S&P just missing out (-0.32% and -0.15%). For context, the Dow traded lower by -785 points before finishing the day down only -79 points.
While the market cheered the U.S.-China trade truce on Monday, a degree of skepticism sent the market lower on Tuesday due to a lack of details and a tight-lipped China.
Then word Wednesday night that China's Huawei CFO, Wanzhou Meng, was recently arrested in Canada (at the request of the U.S. for violating Iran sanctions) sent stocks reeling on Thursday morning.
The market plunged quickly, but successfully tested support and bounced from there. Stocks then began slowly grinding higher.
Reports that China was 'very confident in reaching an agreement' within the next 90 days helped ease concerns.
Then late in the day there were reports that the Fed was going to change their language to reflect their desire to take a more measured wait and see approach. It's still widely expected that the Fed will raise rates at their December meeting. But the expected three rate hikes in 2019 was immediately called into question. And traders applauded the go slower approach.
That accelerated the market's rebound, making it the biggest market swing since 2010!
I was a buyer yesterday after hitting support, and I hope you were too.
Today the market will focus on the Employment Situation Report. Expectations are for 190,000 new jobs (183K in the private sector and 7K in the public), while the unemployment rate stays the same at 3.7%.
But yesterday's spectacular plunge and rebound may just have signaled the correction is over!
Best,
Kevin Matras
Executive Vice President, Zacks Investment Research
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