The market is sharply higher after closing on its lows yesterday. We commented that depending on how desperate portfolio managers are to put cash to work we could see dip buyers emerge quickly. But for the market to only be lower for one day is surprising. Although the day is still early.
It is unclear what the real catalyst is for this morning's move. It could be the news that Obama will seek a package to avoid the sequester. Outside of that there aren't too many datapoints that would boost stocks.
Earnings continue to trickle in, but are a mixed bag for the most part. In economic news, the January ISM Services Index came in at 55.2, which is below last month's reading of 56.1.
Asian markets were mostly lower overnight, led by a 2.3% decline in Hong Kong and -1.9% in Japan. China actually closed a bit higher after its HSBC Services index rose to a 4-month high of 54.0.
Europe's markets are bouncing from yesterday's selloff. A number of countries in Europe released their services PMI readings. Overall, the Eurozone PMI came in at 48.6.
The dollar is slightly lower today, while commodities are mixed. Oil prices are higher near $96.85 while gold prices are weak around $1671.
The 10-year yield is rising again today and back to the 2.0% level reached last week. The volatility index is down -5% after a big spike higher yesterday and back below the 14.0 level.
Trading comment: We have been looking for a pause in the market, but didn't think it would only last one day, especially given that the selloff yesterday was more pronounced than we have seen in weeks. That said, the S&P 500 is back above the 1500 level but not by a meaningful amount. The SPX first hit 1500 on 1/24, and at the time we said there would likely be some consolidation around that key level before moving convincingly above it. So far it has been 8 trading sessions that we have oscillated around that 1500 level. So the market may have actually built back up some of its internal energy, although we still think the consolidation last a bit longer.