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Profit from the Pros By Kevin Matras Executive Vice President
Stocks Close Higher After Spectacular Rebound
Stocks opened lower yesterday and then plunged even further shortly thereafter. But then, a little after noon, stocks began their comeback. And by the end of the day, all of the indexes were in the green.
The Dow was down as much as -2.74% before closing up 0.29%. The S&P was down -3.99% before closing up 0.28%. And the Nasdaq was down -4.90% before closing up 0.63%.
The Dow and the S&P both briefly entered 'correction' territory (a correction is defined as a decline between -10% and -19.99%), before turning back up. The Dow at its worst (from their recent high to yesterday's intraday low), was down as much as -10.29%. The S&P was down as much as -12.37%. And the Nasdaq, which was already in correction territory, was down as much as -19.23%.
By day's end, the Dow and the S&P exited correction territory, and were back in just 'pullback' territory (a pullback is defined as a decline between -5% and -9.99%). By the close of the day, the Dow's pullback was just -7.00%, while the S&P's was just -8.48%. The Nasdaq remains in correction territory (-14.54%), but nicely off their corrections lows.
I've written that pullbacks are common occurrences as they take place on average 3-4 times a year. (The Dow and the S&P pulled back 3 times in 2020.) Corrections are not uncommon either, as they happen on average of once per year. (The Nasdaq corrected once in 2020.)
With all of the major indexes having crossed into correction territory (and bouncing solidly off their lows), it looks like we can finally put a checkmark in the correction box for all of the indexes. And I'm glad to do it as it was overdue.
Could stocks still go down again? Sure they can.
But the selloff last week was already feeling overdone. And yesterday's intraday selloff only exacerbated that oversold feeling.
Traders will be getting ready for Wednesday's FOMC Announcement.
Quite frankly, I don't know what all of the angst is about. The Fed has already said they expect to unwind their bond-buying by mid-March rather than June. So we already know that. And they've suggested they could raise rates 3-4 times this year, and won't likely begin until after they're done with QE. So we already know that too.
We'll get the FOMC Meeting Announcement on Wednesday at 2:00 PM ET, followed by the Fed Chair Press Conference at 2:30.
But that's on Wednesday. Before that, we've got a whole slate of other economic news today, including retail sales via the Redbook report, the Case-Shiller Home Price Index, Consumer Confidence, and the Richmond Fed Manufacturing Index.
Yesterday was pretty impressive.
Whether today is up or down, just be sure to keep your eyes on the big picture. Because the big picture looks pretty bullish, with robust growth outlooks for this year and next.
So make sure you take full advantage of it.
See you tomorrow,
Executive Vice President, Zacks Investment Research
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