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“We will ensure that there is no unwarranted tightening of financing conditions,” – Isabel Schnabel, ECB Board Member
Well, that didn’t take long. Just days into a market growing uneasy with the rise in government bond yields and Christine Lagarde noted that the ECB is ‘closely monitoring’ the situation in fixed income markets, Isabel Schnabel, a prominent member of the ECB tried to reassure markets that the ECB “will ensure that there is no unwarranted tightening on financing conditions”. She went on to add that the central bank would add further support to the markets if rising yields threaten to hurt growth. On both sides of the Atlantic, central bankers are doing their best to reassure markets that they will keep rates low, but for now, at least, the market isn’t so confident.
Futures have been volatile this morning and depending on when you look they may be up or down, and they are currently on the downside for both the S&P 500 and the Nasdaq. The economic calendar is busy with Wholesale Inventories, Personal Income, and Personal Spending at 8:30 AM. At 9:45, we’ll get the release of the February Chicago PMI, and then at 10:00, we’ll close out the week with the University of Michigan Sentiment Index.
Be sure to check out today’s Morning Lineup for updates on the latest market news and events, earnings reports from around the world, ARK Invest fund flows, economic data out of Europe, an update on the latest national and international COVID trends, including a new series of charts tracking vaccinations, and much more.
Thursday was a day many bulls would rather forget as the S&P 500 dropped over 2%, and the Nasdaq 100 fell more than 3%. Historically, declines of these magnitudes usually see a modest bounceback the following day, but believe it or not, the distribution of returns based on the day of the market decline varies widely. The charts below show the S&P 500’s and Nasdaq 100’s average next-day return (top charts) and the percentage of time each index is up (bottom charts) following days when they experience sharp declines.
When the S&P 500 declines more than 2% on a Thursday, the average next-day return is just 0.02% with positive returns 50.6% of the time. Of all the days of the week, that is the second weakest next day return and the second-lowest percentage of positive returns.
For the Nasdaq 100, it’s a similar setup. When that index declines more than 3% on Thursdays, the average next-day return is a gain of 0.05% with positive returns just 47.3% of the time. More than any other day of the week, when the Nasdaq 100 drops 3% on a Thursday, the likelihood of a down Friday is the highest.