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“For the execution of the journey to the Indies I did not make use of intelligence, mathematics or maps.” – Christopher Columbus

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The bond market is closed today, so at least Treasury yields can’t go up.  We wish we could say the same thing about yields across the Atlantic, though, where British gilt yields are all higher and getting back up near their closing highs from less than two weeks ago.

Equity markets are open for trading today, and after opening sharply lower last night, futures have rebounded to move close to the unchanged level.  That’s the type of environment we’re in these days when just a modestly negative open to start the day is considered a win.  With banks and the treasury market closed for trading, there is no economic data on the calendar today, so expect volumes to be on the light side.

How bad is sentiment out there?  In looking through the various Bloomberg headlines this morning, the following three were all out one after the other:

• “Deutsche Bank Strategists See 12% Drop in US EPS Next Year”
• “MS Strategists See Bear Market Continuing Until Earnings Reset”
• “Goldman’s Kostin Sees Strong Dollar as Headwind for US Earnings”

Like the birds overhead, sentiment heading into earnings season has been moving south.  Bulls can only hope that sentiment has moved south enough already.

Over the last several years, Columbus Day has seen some extreme market moves.  The two best Columbus day performances for the S&P 500 were in 2008 (+11.58%) and 2011 (3.41%), and the one thing both of those years have in common is that they were lousy years for stocks heading into Columbus Day  To the downside, the worst Columbus Day performance was in 2014 when the S&P 500 declined 1.65%, and no other year besides 2014 over the last 25 has seen a decline of more than 1%.

While the two best Columbus Days for the S&P 500 came in years when stocks were already down big YTD, there isn’t really much of an inverse correlation between YTD performance and Columbus Day returns.  In the seven years over the last 25 when the S&P 500 was down YTD heading into the holiday, the median Columbus Day performance was a gain of 0.13% with positive returns four out of seven times (57%).  In the 18 remaining years when stocks were up YTD heading into the holiday, the S&P 500’s median performance on Columbus Day was a gain of 0.05% with gains 10 out of 18 times (56%).

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