Stocks Closed Higher For The Week After Stunning Reversal  Image: Shutterstock Stocks soared on Friday with all of the major indexes finishing up for the week. After Thursday's stunning bullish reversal, we saw stocks build on those gains on Friday. It's quite possible that Thursday's plunge, following Russia's full-scale invasion of Ukraine, was the correction low. From the recent all-time highs to Thursday's intraday lows, the Dow fell by as much as -12.7%; the S&P by -14.6%; the Nasdaq by -22.4%; and the small-cap Russell 2000 by -22.9%. But by the close on Thursday, everything was significantly off their lows. And by the close on Friday, the Dow and the S&P were both out of correction territory, having trimmed their losses to -7.83% and -9.01% respectively. The Nasdaq trimmed their losses as well to 'just' -15.5%. And the Russell is down -17.0%. So what sparked the turnaround? For one, it should be noted that stocks typically perform well during times of war. Two, stocks had become oversold. Aside from spiking energy prices, the war between Russia and Ukraine should not impact corporate earnings in the U.S. The realization of that, coupled with Thursday's dramatic sell-off, which looked to be way overdone, prompted a flood of new buying to come in and pick up stocks at those new lows. And that buying continued on Friday. Three, after the correction we've seen, and the rise in energy prices, which has only been exacerbated by the war, there is now a belief that the Fed will only raise rates by a quarter point come March 16th, and not the half point that many were speculating they were going to do. That could potentially pose one less shock to the market given everything that's been going on. Four, the world appears to be uniting around the condemnation of Russia. More and more sanctions are being levied by the U.S. and its allies. Even China, which many feared would be a backer of Putin, saw lending restricted to Russia by two Chinese state-owned banks. While China still seems friendly to Russia, it looks like they are willing to only go so far in their ostensible support of Russia. Five, corrections in bull markets typically happen once a year. A correction is official once the index declines by -10% or more. While the Nasdaq corrected in 2021, we did not see one in the Dow or the S&P. (Although, they did have a few pullbacks last year, but they never reached the -10% mark.) Having finally seen the long-awaited corrections in all of the major indexes on Thursday, that was a signal for many that now was the time to buy. And six, there's just too many positives in the U.S. economy right now to ignore. In the Fed's own words, the economy remains "really strong," the labor market is "rapidly" improving, "consumer demand is very strong," and "incomes are very strong." Moreover, with Omicron cases falling, and Covid restrictions being lifted all over the country, and the world, the pent-up economic demand in the U.S. and abroad, is expected to usher in a multiyear boom. So keep your eyes on the big picture. Because once we get past the initial shock of war, the markets look poised to soar. So make sure you're taking full advantage of it. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
Tidak ada komentar:
Posting Komentar