While equities sold off early morning yesterday, the damage was very much contained as the afternoon session brought in renewed buying and kept losses at a minimum as the chart above shows.
Commodity prices were pressured with gold and silver taking the brunt of the hit. Gold dropped below the 1,400 level while crude oil traded below the $90/barrel mark. Profit taking played a big role as commodities have been on a strong upward path.
The explanation for gold’s decline was improved expectations for a global recovery, which presumably reduces uncertainty and causes investors to prefer equities over hard assets. Let’s see what happens not if but when new signs of economic headwinds surface unexpectedly again. Additionally, beginning of the year portfolio rebalancing could have played a role as well.
Today we’ll be looking at non-manufacturing data and the ADP employment number, which is the precursor of the all important jobs report due out on Friday. Any positive surprises can easily move the markets towards their all-important 1,300 level of the S&P; 500.
Disappointment with any of these numbers could make investors question as to whether these lofty levels of the major indexes are actually justifiable.