Dow Jones Industrial Average Narrowly Avoids Another Loss After Hawkish Yellen

This Rare Dow-VIX Divergence Bodes Well For Stocks

Mar 3, 2017 at 4:27 PM
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The Dow Jones Industrial Average (DJIA) charted a narrow 86-point range, eventually settling on a modest gain north of 21,000, following Fed Chair Janet Yellen's highly anticipated speech. Specifically, Yellen confirmed the central bank could adjust interest rates this month if "employment and inflation are continuing to evolve in line with our expectations" -- further increasing the odds of a rate hike. As a result, financial stocks outperformed, while real estate lagged. Also, thanks to last-minute buyers, the Dow avoided its first back-to-back loss in more than four weeks, and held on for its fourth consecutive weekly gain.

Continue reading for more on today's market, including: 

  • This week's extremely rare Dow-VIX divergence could bode well for stocks.
  • A pair of bright spots in the struggling retail sector.
  • 4 reasons we rejected this bearish biotech trade.
  • Plus... AMD crashes, harsh words for GoPro, and Apple traders eye $200.

The Dow Jones Industrial Average (DJIA 21,005.71) edged up a slim 2.7 points for a third straight finish above the 21,000 level, and also brought its weekly gain to 0.9%. Fourteen Dow stocks ended in the green, led by Caterpillar Inc. (NYSE:CAT), which tacked on 0.8%. Leading the 16 losers with a 1.9% loss was Nike Inc (NYSE:NKE).

The S&P 500 Index (SPX - 2,383.12) added 1.2 points, or 0.05%, while the Nasdaq Composite (COMP - 5,870.75) was up 9.5 points, or 0.2%. The SPX and COMP advanced 0.6% and 0.4%, respectively, relative to last Friday's close, with both notching their sixth consecutive weekly gains. 

The CBOE Volatility Index (VIX - 10.96) dove 0.9 point, or 7.2%, for its first close south of 11 since Feb. 14. On a weekly basis, the market's "fear gauge" gave up 4.4%.

closing indexes summary march 3
NYSE and Nasdaq stats March 3

5 Items on Our Radar Today

  1. Speaking to CNBC yesterday, Fed Governor Jerome Powell said the central bank's case for a March rate hike "has come together." Powell added that he believes three interest rate increases are warranted in 2017. In today's speech, Powell cautioned of the risks associated with digital currencies(Reuters; Business Insider)
  2. Meanwhile, during a speech in Chicago, Fed Vice Chair Stanley Fischer warned against forcing the central bank to act according to predetermined rules. "Committees and rules each have their advantages. Committees embody a wider range of information and have a capacity for innovation," Fischer explained. When asked about current monetary policy, the central banker said, "If there has been a conscious effort to move up rate hike expectations I am going to join it." (CNBC; MarketWatch)
  3. The catalyst behind the latest Advanced Micro Devices, Inc. (NASDAQ:AMD) sell-off.
  4. Analyst: GoPro Inc (NASDAQ:GPRO) is the "best house in a deteriorating neighborhood."
  5. Apple Inc. (NASDAQ:AAPL) options traders have set their sights on $200.

corporate earnings march 3

Unusual Options Activity March 3
Data courtesy of Trade-Alert

Commodities

Oil prices muscled higher on the back of a weaker dollar and an armed production disruption at a major Libyan port. Specifically, April-dated crude futures added 72 cents, or 1.4%, to settle at $53.33 per barrel. However, on a weekly basis, liquid gold lost 1.2%.

Gold fell in response to Yellen's hawkish comments. By day's end, gold for April delivery was down $6.40, or 0.5%, at $1,226.50 per ounce, bringing its weekly deficit to 2.5%.

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