The major market averages opened lower on Thursday, in one of the more persistent early selloffs we have seen so far this year. However, after falling enough to cast some doubt on the recent bull market in stocks, prices found their low point around mid-morning then began a recovery rally into the market’s close. By the closing bell the major averages had recovered most of their losses with the Standard & Poor’s 500 lower by 0.21 percent and the Nasdaq Composite off 0.29 percent. At one point during the morning the Russell 2000 small company index was down by as much as 2.01 percent, before buyers helped lift the index to finish lower by just 0.77 percent on the day.
Generally speaking, the stock market has been stalled out since early December, which may be trying some investor’s patience lately. However, just like a youth bopping down the street as they listen to their favorite song through their headphones, the stock market has its headphones on as well. You and I can’t necessarily hear the music, but the market has its own dance steps and has a purpose behind the steps it has made so far. Once prices move higher, like they did in November, they typically have to mark time, which is something like dancing in place for a while. To investors this can look like a short price decline, or prices can merely trade sideways for a while, which is what we have been watching since early December.
Though sharp declines like we saw Thursday morning can be scary, so far, volatility measures appears to be relatively subdued. This typically means that the potential exists for higher highs in the market averages in the near future.
This week most areas of the bond market are little changed making it difficult to draw much of a conclusion as to what is on investors’ minds. The top performing bonds for the week were led by the Bloomberg Barclay’s U.S. Convertible Bonds index up 0.47 percent over the past five trading days, followed by the S&P/Citigroup International Treasury Bond index higher by 0.28 percent over the same period.