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Industrials on deck — What you need to know in markets on Friday

Myles Udland
Markets Reporter

A busy week of earnings and big swings in the market will be capped off on Friday with an update on the industrial sector.

Earnings due out Friday morning include results from GE (GE), Honeywell (HON), Stanley Black & Decker (SWK), and Schlumberger (SLB). On the economic data side, we’ll get data on the U.S. manufacturing sector from Markit Economics as well as new home sales in the morning.

On Thursday, we saw a broad-based rally in the market after two straight down days. The rally lost a little bit of steam late in the day, however, following headlines that at least one police officer had been killing in a shootout in Paris just days before the first round of the French presidential elections on Sunday.

The day that was

Overall, Thursday was a positive day for markets.

According to Dave Lutz at JonesTrading, here’s what some traders were talking about during the action:

—The growth trade is back on, as Treasury yields rose and the chances of a Fed rate hike in June rose to 63%. 

—Hedges in Europe appeared to be coming off during the day ahead of Sunday’s elections in France. The CAC in Paris was up 1.7% on Thursday. Late Thursday, however, headlines crossed that at least one French police officer was killed in a shooting on the Champs Elysee in Paris. This took some steam out of the market into the close. 

—Reports that healthcare reform was alive had some betting that perhaps the Trump agenda is back in play, bringing animal spirits — maybe! — back into the market. 

—Friday is the third Friday of the month and will be a widespread options expiration event in markets, leading to a lot of position-squaring across the board.

—Another overlooked story on Thursday was the success in the retail sector — the XRT ETF which tracks retail outperformed the market — leading to speculation that some of Thursday’s action was also tied to a pain trade given that broad positioning is against the space generally.   

But the real takeaway from Lutz’s commentary on what did and did not drive markets on Thursday is that it’s never just one thing.

Many people who track markets closely day in and day out — media included — like to find the 30,000-foot encapsulation of the day’s action, to provide a one-sentence summary of the market. This effort to make things simple, however, more often than not creates situations where to summarize the day’s action is to misrepresent what happened.

As we can see, on Thursday a lot of things happened. Some of them were political, some of them were technical, some of them were economic. To say that stocks rallied on abating concerns about North Korea or because of one thing a politician said is to oversimplify to the point of misleading.

Einstein said that one ought to always pursue a solution that is as simple as possible but no simpler.

And when it comes to drawing a composite sketch of the day’s market action, one sentence is rarely enough. In fact, it’s often too little.

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

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