Risk On For Sure, Right?

Only because it’s the first day of the new year am I pointing herein to the oddness of a particular single-day’s trading action.

What a way to start the new year! With the Dow (30 stocks) up 330 points (1.1%), the S&P 500 up 0.8% and the Nasdaq Composite ahead by 1.3%!

So, risk on for sure, right?

Well, not so fast; looking at market breadth, while it improved over the past few hours, it definitely didn’t scream “all-in”.  As of the regular session close, 238 (just shy of half) of the S&P 500 stocks actually traded lower on the day, while roughly half (1,290) of Nasdaq members traded down as well.

What’s even more interesting is the fact that the two places where you can generally count on investors to hide out when they’re scared (i.e., or entirely avoid when they’re not) is gold and bonds, which happened to be up .73% and 1.13% on the day respectively… Hmm… 

So, if gold and bonds screamed higher, certainly your defensive sectors would’ve been on the rise as well, right? Well, no, utilities and consumer staples traded down 1.25% and 0.8% respectively. Hmm….

Ok, so at least we can bank on the fact that since industrial stocks had a great day (+1.53%), materials must’ve been right there with them, right? Well, no, materials stocks as a group actually closed down 1.16%.

Now, I will say that this one-day strangeness is specific to the U.S.. Our foreign exposures, across the board, traded markedly higher (most notably besting the U.S. averages) on very strong breadth during the U.S. trading session. 

All of the above said, we can try and justify today’s weirdness with a look at how the dollar correlates to each sector, how maybe bonds are rallying because the Fed’s dovish, and utilities (highly correlated to bonds, typically) are tanking because they’re defensive and a dovish Fed is considered good for the economy — but, frankly, any explanations I might throw out would be sketchy at best.

Bottom line, this is one of those strange days that would take too much reaching and mental straining to make sense of, so we won’t — at least not on the blog…


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