Economist's Insights

Today’s Trading – Stock Bulls Regained Their Composure as Last Week’s Net Selling Enticed Buyers Back Into the Market

Feb 12, 2018

The Dow tacked on 410 points (1.7%) to last Friday’s 330-point (1.4%) gain, trimming its net loss over the last seven sessions (starting February 2) to 1,585 points (-6.1%). Earlier in the day, the Dow had gained as many as 574 points which put the index almost on top of the 50%-retracement line of its most extreme 2,800-point loss (10.8%). The S&P 500 and Nasdaq rallied 1.4% and 1.6% respectively. Equities, which fell into a rate-induced tailspin beginning February 2, seemed more comfortable with higher yields; at least for now. Treasury note yields ticked higher with the 10-year yield up 0.7 bps to 2.86%, its highest close since January 2014, the 5-year yield 1.5 bps higher at 2.56%, and the 2-year yield essentially unchanged at 2.08%. In addition to the healthy stock gains and absence of any significant economic data (Treasury’s monthly budget statement showed a smaller-than-expected surplus), headlines also focused on the White House’s $4.4T deficit-increasing fiscal 2019 budget proposal – largely a ceremonial event – and a 55-page document detailing the administration’s infrastructure plans.