What’s happening today? Dow rises and Oil is high!

Bull in the market?

  • The Dow Jones Industrial Average was up by 145 points
  • S&P 500 by 0.5%
  • Nasdaq Composite by 0.5%
  • Brent Crude by 2.1% and is 84$
  • WTI by 2.7% and is $81
    The hike in interest rates is anticipated for a long period of time, this may trigger the Feds to hike the rates. High prices and interest rates affect consumer demand and could prove costly for companies.

With corporate earnings coming round the corner, investors will see how the companies are faring from the impact of energy price and supply-chain complications.

Are these factors good for investors? Is this the time to invest or pull out? Thoughts?

Ya know, one of my pet peeve is news headline blaring: “The DOW is up 145 (or insert whatever number you want here) points today!!”. Most financial news opens their end of day summary with this type of headline (typically with DOW index because it has the longest history, even though it is extremely flawed).

But what does 145 mean? is it good? bad? Based on the current DOW level as of this writing, 145 points translates to ~0.4% daily change. How often does that happen?

Here’s the distribution curve of the daily returns of Dow Jones from the past 23 years. A +0.4% daily change happens 12% of the time. In other words, it happens once a month. I’m not sure i would call that news.

As a side note, the overlay dashed line is the normal distribution curve. As you can see the daily returns of the market does not follow the normal distribution - nevertheless, normal distribution model is pervasively used in financial/risk forecasting.