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“I like liquor — its taste and its effects — and that is just the reason why I never drink it.” – Stonewall Jackson

Morning stock market summary

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On this anniversary of the battle of Bull Run, the first major conflict of the Civil War, and as bulls wage another battle against the bear market trend,  the above quote from Stonewall Jackson seems applicable.  As investors and/or traders, it’s always important to recognize your weaknesses and take steps to avoid them.  Those who tend to overtrade or get emotional in reaction to market headlines should take a step back and keep things in perspective.  Earnings season is a time of heightened volatility where each major earnings report tends to get extrapolated to the broader economy until the next earnings report sends a different contradictory message.

The market has strung a number of good days together as bank stocks have rallied in reaction to their reports kicking the earnings season off on a positive note.  Overall, results have generally been better than expected which has been a good sign.  Next week, we’ll get into the heart of earnings season; not only will the pace of reports pick up, but we’ll also hear from the largest companies in the market.

This morning’s market tone is biased to the downside as all the major US averages are indicated to open flat to modestly lower, but there has been some volatility following news of the ECB’s 50 bps rate hike (hinted at earlier this week) hitting the tape.  The big move has been in crude oil which is trading down over 4% and near its lowest levels since the first quarter as supplies from Libya ramp up and Russia has resumed the supply of natural gas on the Nord Stream pipeline.  On the economic front, it’s a busy day for data with Jobless Claims and the Philly Fed report at 8:30 eastern and leading indicators at 10.

Today’s Morning Lineup discusses earnings news out of Europe and the US, the latest ECB decision, events in the Ukraine and Italy, and economic data from around the world including UK home prices and weekly US mortgage application data.

The rally we have seen in stocks over the last week has been a textbook example of risk-on.  Take a look at sector performance below.  Besides cyclical sectors leading while defensives have lagged, outside of the Energy sector, the leading sectors over the last week (Consumer Discretionary, Technology, and Communication Services) are also the ones down the most YTD.  Conversely, sectors that have declined or seen the smallest gains over the last week have all outperformed YTD. On the topic of energy, while it has been a leader over the last week, today’s 4.5% decline in crude has the sector trading down 2.5% in the pre-market.

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