A day of concerns about higher inflation along with a weaker than expected economy got the market to open sharply lower yesterday, but by the end of the session, things made a dramatic recovery off of their worst levels and today could be a strong day to continue this volatile trend.

The Dow began with a huge decline of 703 as a result of the initial reading of first-quarter G.D.P. coming in lower than expected with a 1.6% advance while the inflation components were higher than expected. But by the end of the day, it had cut its loss almost in half to a final 375 point close to end at 38,085 led by selling in CAT after earnings, in addition to MSFT ahead of its earnings releases last night.

The S&P also got blasted lower on the opening as well with a decline of as much as 81 points which also got reduced significantly by the end of the session with “only” a final 23 point everyday type of loss down to 5048. It was hurt by declines in some of the larger technology issues such as AMZN, GOOG and MSFT, all of which should do better today.

The Nasdaq naturally also got slammed on the opening to a 370 point decline as a result of all the large technology weakness but it too cut this selling to a final 100 point close at 15,611.

The Russell 2000 Index of small stocks closed lower by 14 down to 1981 while the VIX turned an initial decline on the very weak equity opening into another lower session at 15.37 as that resistance in the 19 area has kept equity declines down to a controlled level with the S&P battling back from a 5.5% loss at its worst showing and the Nasdaq back from a 7.4% hit from the highs.

The concerns about a potential bad combination of higher inflation and slower growth was the initial cause of the selling along with a sharp decline for META resulted in the awful opening, which sort of got corrected as the day moved along. 

 

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Donald M. Selkin

Chief Market Strategist

 

Don Selkin is the Chief Market Strategist at Newbridge Securities Corporation, member FINRA/SIPC and provides the Fair Value analysis for CNBC each morning. The commentary provided in this Market Letter is intended to provide our current or potential customers with timely market analysis and should not be considered a research report. This Market Letter may contain, and is limited to: Discussions of broad based indices; Commentaries on economic, political or market conditions; Technical analysis concerning the demand and supply for a sector, index or industry based in trading volume and price; Statistical summaries of multiple companies’ financial data, including listings of current ratings; and, recommendations regarding increasing or decreasing holdings in particular industries or securities. This Market Letter does not make a financial or investment recommendation or otherwise promotes a product or service of the firm. This Market Letter contains only news, facts, and commentary on information previously reported from a news source believed to be accurate and reliable by the author. These news sources include the following: {Bloomberg Financial, Reuters, and Associated Press}. It is possible that at any given point in time, the author, Newbridge Securities, or one or more of its employees or registered individuals associated with Newbridge Securities, may hold a position, either long, or short, as well as options, bonds or other instruments in the companies mentioned in this report.