With the strong follow-through in the S&P 500 index futures for most of the premarket session, it seemed a foregone conclusion that the index was going to cruise to a new all-time closing high. However, the last few hours of the premarket session, when the index retreated 20 handles from the high, was a better tell for the upcoming session.
Notwithstanding the 140 handle rally from Thursday’s post-Fed announcement low (4602), to the premarket and new all-time high (4743.25), other factors must be considered for the retreat. First of all, there is a quadruple witching on Friday, which often creates excess volatility and some market participants may have opted to lock in the windfall profits from Thursday as opposed to holding out for the actual expiration of futures and options contracts.
In addition, the newsflow regarding the Omicron variant has been disconcerting. Warnings from Canada and other European countries of large-scale reportings, the validity of testing concerns of the virus, and the potential for hospitals to be overwhelmed have put many investors on edge. Under those circumstances, they opt for the “sell” as opposed to the “buy” button on breaking headlines.
Heading into the final hour the index finally bottomed at 4642 and attempted to rebound into the close. The index was able to distance itself from the low but ended in the red by 39.75 handles at 4660.75.
One of the areas of strength in the weak market was the financial sector. This was evidenced by the top component of the index being Berkshire Hathaway B (NYSE: BRK.B) being the biggest trainer. The issue surged to a new all-time high and closing high by adding $5.59 or 1.9% to close at $300.17.
That was in stark contrast to the cash index’s decline of 0.87%.
Leading the tech wreck of the top components was Nvidia Corp (NASDAQ: NVDA). The always volatile issue shed $20.72 or 6.8% to close at $283.87.
PreMarket Prep Stock Of The Day: Accenture Inc. (NYSE: ACN)
It is always a tough call to decide what to do when a stock is gapping and breaking out to new all-time highs following an earnings beat. Read more about ACN here.