When I came into the NYSE this morning at about 5:15 am ET, the few traders walking around were expecting a huge downdraft on the open with a big spike in volatility.
The only thing they weren't expecting was a flat opening.
That's exactly what happened.
It wasn't just flat, it was relatively calm. The NYSE had made some modest changes to the way stocks open following the August 24th 1,000 point drop in the Dow on the yuan devaluation (generally they made it easier to have a fully automated open), so that may have helped. But even then the number of stocks that opened above or below 5 percent was relatively modest.
And volatility—the CBOE Volatility Index (VIX), a measure of trader interest in buying protection against further market drops--declined to 16 and change. 16? Last night there were traders saying the VIX could open at 50.
What happened? Simply put:
1) The sectors that would benefit from a Trump infrastructure stimulus (metals/mining, steel, some Industrials),
2) Combined with the companies that would benefit from reduced regulations (pharmaceutical/biotech, energy, banks),
3) Combined with those that would benefit from higher interest rates (banks, insurance), or
Are being balanced against companies:
1) That might get hurt by trade issues (autos, some tech, some railroads), or
2) By the abolition of Obamacare, like hospital stocks.
Bottom line: Combine the potential for tax reform, fiscal stimulus, and lower regulations. Balance it against worries on trade. You have the market we are seeing today.
Finally, a shout-out to the little-understood (and sometime maligned) stock circuit breaker system. The eMini S&P 500 futures contract halted trading around midnight, when it fell 5 percent. Under the rules, it could have traded higher, but not lower, until the open. Which is what it did immediately—trade higher. That was the low. My point is that these circuit breakers were designed to pause the market during periods of high panic and uncertainty, and to give a few moments of reflection. That, it seems, is exactly what happened.