Yesterday's sell-off is looking like a one-day event for the moment. There is little follow-through to yesterday's selling. Market internals
Yesterday was what technicians call a distribution day, a day when stocks were down big on higher volume. There were four stocks declining for
It means that a lot of big holders of stock were
But for traders to be convinced that institutional sellers were really dumping stock you would need a series of distribution days close together. We haven't seen that yet, and today's action —so far — indicates it isn't happening today.
Technical analysis service Lowry's, surveying yesterday's damage, noted some short-term issues for the market but concluded, "There are, as yet, very few signs suggesting weakening in the intermediate or primary uptrends in the market."
Nor do I know of any strategists taking down estimates in light of yesterday's developments. This morning, JP Morgan's Equity Strategy Group told clients they were maintaining their year-end S&P 500 price target of 2,400 and raised their estimates for S&P 500 earning this year to $130 from $128 on better earnings growth and guidance.
But the strategists there also acknowledged that there is indeed a premium in the market for the Trump agenda, and concluded, "We see limited room for equity multiple expansion absent further progress on the pro-growth agenda in Washington."
More troublesome is the continuing decline in 10-year yields. The spread between the 10-year and 2-year was below 100 basis points this morning, the narrowest spread since the election. This flatter yield curve — it's been going on for a couple months — is killing banks, many of which are already in correction territory from the 52-week highs in early March:
Banks: correction territory
(from 52-week highs)
Zions down 18.6%
Fifth Third down 18.0%
SunTrust down 12.5%
Bank of America down 12.0%
JPMorgan down 10.9%