Tuesdays Prove Happier Than Friday Night With 9% Gain in S&P 500Michael P. Regan
Tuesdays are generally a pretty boring day. The Monday blues have faded somewhat, yet it’s still too early in the week for respectable people to tie one on at a happy hour. It’s not even known as a “must see” night for television.
In the U.S. stock market, however, Tuesday is turning out to be the most exciting day of the week this year. Of the 16 Tuesdays that have come and gone so far in 2014, the Standard & Poor’s 500 Index has risen on 14 of them for a cumulative return of more than 9 percent. That’s not too shabby considering that when all days are counted, the benchmark gauge is only up about 1 percent for the year as of today’s open and cumulative returns are negative on each of the other four days.
There has been much chatter, among those who chatter about such things, about why the second day of the work week has been so good for the market. Josh Brown, the chief executive officer of Ritholtz Wealth Management and author of The Reformed Broker blog, tweeted out his theory: Individual investors manage their retirement accounts over the weekend and mutual funds receive fresh deposits on Mondays. To account for the increase in funds’ net asset values, stocks are bought on Tuesdays.
While the fund-flows theory makes sense to Dave Lutz, head of ETF trading and strategy at Stifel Nicolaus & Co. in Baltimore, he says there may be a second tailwind at work.
Investors tend to focus their buying in options and derivatives on Mondays to protect from losses in stocks ahead of the week’s potential market-moving catalysts, Lutz said in an e-mail today. The demand for protection abates by Tuesdays and investors start focusing on stocks, he said.
While trying to divine explanations for the Tuesday rallies could be a case of being fooled by randomness, the fund-flows theory does make some sense, John Manley, chief equity strategist at Wells Fargo Funds Management in New York, said in a telephone interview. Also, bad news tends to happen over the weekend so the phenomenon could be a result of buyers coming in after losses in stocks on Mondays, he said.
“First of all, it could be sunspots,” Manley said. “But as improbable as anything may sound, it’s not illogical.”
Indeed, the buying on Tuesdays has followed the two worst days of the week this year. Mondays have shown a cumulative loss of 2.6 percent and Fridays have tallied a sum loss of 4 percent, according to data compiled by Bloomberg.
The S&P 500 gained as much as 0.6 percent today. Thank God it’s Tuesday.