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(Monday Market Open) Equity index futures are pointing a little higher on Monday morning as oil prices and yields have pulled back slightly in premarket trading. Investors can focus on earnings this week because there are few major economic announcements. Perhaps the biggest news will come Thursday as the Consumer Price Index (CPI) is reported.

According to Barron’s, Softbank is potentially looking to cut its stake in Alibaba (NYSE:BABA) pushing the stock 4.38% lower in premarket trading. Softbank is one of BABA’s largest shareholders holding 25% of the company’s outstanding shares. BABA filed with Securities and Exchange Commission to register 1 billion American depository shares.

Additionally, toymaker Hasbro (NASDAQ:HAS) is up 2.2% in premarket trading after beating on top and bottom line numbers. HAS also raised its dividend by 2.9%. 

Working It

Before Friday’s market open, the Bureau of Labor Statistics (BLS) released its Employment Situation Report that showed the labor market created many more jobs than expected, adding 467,000 jobs, which was well above the estimate of 150,000. More than 444,000 jobs were added in the private labor market alone. Additionally, the BLS adjusted the December payrolls up from 125,000 to 500,000, showing that the market has been stronger than previously reported.

Oddly, the unemployment rate rose from 3.9% to 4%, but this was because many more people came back into the workforce. The workforce participation rate grew from 61.9% to 62.2%, which suggests the labor market is much more appealing to workers. Higher wages are certainly an attraction, and the average hourly earnings rose 0.7% month over month and 5.7% year over year.

Rising yields prompted the U.S. Dollar Index to rally, breaking a four-day slide. Yields got another boost from rising oil prices, which rose 2.13% and closed at $93.05 per barrel, resulting in a new seven-year high. If the TNX is on its way to 2%, then oil may be on its way to $100 per barrel.

Despite the pressure on interest rates and the negative effects rising rates have had on valuations for growth stocks, the Nasdaq Composite ($COMP) still led the major indices and closed 1.58% higher. The S&P 500 (SPX) rose 0.52%. However, the Dow Jones Industrial Average ($DJI) closed 0.06% lower on the day.

Earning It

I’ve been making this point for months now; rising interest rates are forcing companies to earn their stock price gains. Higher interest rates change how investors value companies, which means companies have to produce real earnings and not just the promise of future earnings.

It also means that costs count. Company management must be able control costs and expenses because investors are expecting companies to be better managers of their money. Companies that are not able to match these new expectations will likely see investors leave for better prospects. 

Emotional Management: When monitoring a trade, you may find that you run through the entire gambit of emotions. It often starts with optimism. Then, if the stock rises, you may feel excitement and even euphoria.

However, if the trade goes awry, you may feel anxiety, denial, fear, and panic. Often, investors will sell the stock out of fear. It’s not uncommon for inexperienced investors to sell a stock just before it recovers. Other investors become despondent and quit checking their accounts and ignore their account statements. This may not be all bad if the stock recovers, but–as in most situations in life–burying in your head in the sand brings other issues.

If you hang on through the trade that does recover, you may start to feel hope. Hope can turn into relief as your losses shrink. If you get back to breakeven, you may either feel optimism again, or you may hurry and close the position to avoid the possibility of pain returning, which could mean missing out on further gains.

These are all very common and very normal feelings. There’s nothing wrong with you if you’ve felt this way. We all have, but those that experience longer-term success have found ways to mitigate these emotions. This is a normal occurrence for new or unprepared traders and investors.

Planning for Size: First, having a plan can help you manage your emotions because you define from the beginning if you’re short-term trader or long-term investor.

Second, define ahead of time on what conditions you may want to enter or exit. If a company is trying to change to something that it’s not, it could be a reason to sell. For example, if a financial company is trying to become a social media company, this could be a reason to get out.

Finally, properly diversify. Having 15 to 20 technology or energy stocks isn’t diversified. The S&P 500 stock index is commonly divided into 11 different sectors. A diversified portfolio would draw from many of these sectors.

TD Ameritrade® commentary for educational purposes only. Member SIPC.

Image sourced from Pixabay

This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.