Expect more wild swings in the Dow in February: trader

By Alan Valdes, director of floor operations at Silverbear Capital

The last day of the month is shaping up to be a very busy day. We have ADP reporting a very strong 234,000 versus 185,000 estimated private-sector jobs number. At 2:00 p.m. today, we got the latest from the Federal Reserve, as Chair Janet Yellen ends her four years at the helm. At first, she was not really embraced by many on Wall Street. That opinion has changed over the years, as she has had to deal — successfully — with reducing the $4.5 trillion balance sheet. Most think her successor, Jerome Powell, will follow in her footsteps and not rock the markets. The Fed stood pat today and did not deliver the hawkish surprise some analysts had warned of. Eyes will now be focused on the March meeting, as investors nevertheless sold the news.

Earnings season is in full swing. With 80% reporting better-than-expected earnings for those S&P companies that have reported and 81% beating on the top line, it’s shaping up to be another strong reporting season. This morning, we got earnings from some major companies: Eli Lilly (LLY), Anthem (ANTM) and, the big market mover, Boeing (BA). Boeing, which reported positive sales of the new 787 Dreamliner and, thanks to the Trump’s tax cuts, a cash flow of $15 billion. Today when the Dow (^DJI) was up 250 points, Boeing contributed half of the Dow’s gains at that point.

NYSE big board on January 30, 2018 in New York City.

After all the recent volatility, the Dow was down over 500 points the prior two trading days. However, the index is set to close out another positive month, up over 5% for the month. It is impossible to predict where we will close next month, but expect more wild swings. The higher the index, the larger the point moves become. I would not be surprised to see 500-1000 point moves in the future become somewhat of a monthly event.

Hate him or love him, the president gave an “all-American” State of the Union speech last night. Many people are giving the speech all the credit for today’s move. However, fact is, when you look at today’s move, it’s all Boeing — one stock. Take Boeing out of the equation and the Dow would have been up at its high point today by 125 points (it was up 250 at one point). Take out the jobs number, home sales, a few more earnings, and the market is up probably 45 points, give or take a few. That could be the speech!