U.S. Stocks Recover From Initial Sell-Off Before Closing Mixed

Australian dollars in Sydney, Friday, Jan. 15, 2016. (AAP Image/Joel Carrett) NO ARCHIVING

Stocks showed a significant recovery over the course of the trading session on Monday after moving sharply lower early in the day. The major averages climbed well off their early lows, with the Dow reaching positive territory.

After tumbling by more than 400 points in early trading, the Dow inched up 37.40 points or 0.1 percent to 30,216.45. Meanwhile, the Nasdaq edged down 13.12 points or 0.1 percent to 12,742.52 and the S&P 500 fell 14.49 points or 0.4 percent to 3,694.92.

The initial sell-off on Wall Street came amid concerns about a new coronavirus strain in the U.K., with the variant said to be 70 percent more infectious than the original strain.

The news of the new strain led Canada as well as several European countries, including Germany, France, Italy and the Netherlands, to order a suspension of flights from Britain.

More than 16 million Britons are now required to stay at home as a full lockdown came into force in London and the southeast of England.

Selling pressure waned over the course of the session, however, as traders also reacted to news that Congressional leaders have reached an agreement on a new $900 billion relief package.

The bill will purportedly provide more federal assistance to small businesses, healthcare providers, and the unemployed and includes direct payments worth up to $600 per adult and child.

“As the American people continue battling the coronavirus this holiday season, they will not be on their own,” Senate Majority Leader Mitch McConnell, R-Ken., said in a post on Twitter.

He added, “Congress has just reached an agreement. We will pass another rescue package ASAP. More help is on the way.”

House Speaker Nancy Pelosi, D-Calif., and Senate Minority Leader Chuck Schumer, D-N.Y., expressed support for the bill but said they plan to push for more relief once President-elect Joe Biden is sworn in.

The uptick by the Dow was partly due to a significant advance by shares of Nike (NKE), which surged up by 4.9 percent after the athletic apparel and footwear reported better than expected fiscal second quarter results and raised its full-year sales forecast.

Goldman Sachs (GS) and JPMorgan Chase (JPM) also posted strong gains after the Federal Reserve announced the nation’s largest banks will be allowed to resume share repurchases in the first quarter of 2021.

Sector News

Despite the recovery attempt by the broader markets, energy stocks ended the day sharply lower amid a steep drop by the price of crude oil. Crude for February delivery tumbled $1.27 to $47.97 a barrel.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index plummeted by 2.5 percent, the NYSE Arca Oil Index plunged by 2.4 percent, and the NYSE Arca Natural Gas Index dove by 2.1 percent.

Considerable weakness also remained visible among airline stocks, as reflected by the 2.4 percent slump by the NYSE Arca Airline Index.

Tobacco, utilities and pharmaceutical stocks also saw notable weakness on the day, while banking stocks showed a strong move to the upside over the course of the session.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Monday. Japan’s Nikkei 225 Index edged down by 0.2 percent, while China’s Shanghai Composite Index advanced by 0.8 percent.

Meanwhile, the major European markets all moved sharply lower on the day. While the U.K.’s FTSE 100 Index slumped by 1.7 percent, the French CAC 40 Index and the German DAX Index plunged by 2.4 percent and 2.8 percent, respectively.

In the bond market, treasuries pulled back near the unchanged line after seeing initial strength. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 0.941 percent after hitting a low of 0.895 percent.

Looking Ahead

News on the coronavirus front may attract attention on Tuesday, while traders are also likely to keep an eye on reports on consumer confidence and existing home sales.

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