Daily Market Notes: 7-28-2021

After the upside party of the past five days resulted in new all-time highs for the Dow, S&P and Nasdaq, the bullish move ended abruptly yesterday as ongoing weakness in Chinese issues and a pause in technology stocks resulted in a market that was sharply lower at one point but as has been typical this year, buyers did come in at lower levels to sort of save the day.

For instance, the Dow had been lower by as much as 266 points on its mid-afternoon low before getting a reprieve from this decline as those Chinese stocks, which have taken major league beatings lately, finally stabilized and this took some of the pressure off of stocks here. As a result, it was able to cut its loss to a final decline of 85 down to 35,058. It was hurt by selling in BA, HD, AAPL, MSFT and CRM

The S&P followed the same path but with more drama on the downside as usual as it had the nerve to slide by a large 50 points at 2pm before also finding some stability as it ended with a closing decline of 21 down to 4401. This ended its five-day winning streak.

The Nasdaq, which has been the upside hero all year, sold off to the tune of 337 points and ended with its worst decline since May 12th at a loss of 180 down to 14,660. Declines in some of the FAANG stocks like AMZN and the rest of them sort of did things in.

The Russell 2000 Index of small stocks, which has had little going for it lately, ended lower by 25 down to 2191. The VIX loved this negative action as it went above 20 before ending with a gain up to 19.36.

Bond yields, which usually help technology issues when they decline, could not bring this group any comfort despite ending lower on the 10-year Note down to 1.23% from 1.27% late Monday. Long-term yields have eased off from their sharp rise earlier in the year, but investors are still worried about inflation.

Markets have been choppy as investors try to get a clearer picture of how well the economy is recovering from the pandemic and how the Federal Reserve will eventually ease up on its support with its $120 billion monthly injections. There will be the next statement at 2pm today followed by the usual press conference at 2:30pm at which time Chair Powell will lay out the central bank’s outlook for the economy, inflation and then might reveal its plans for when tapering of the current stimulus might begin, so everyone should pay close attention to this always important event.

Part of the uncertainty hovering over markets has to do with COVID-19 and its potential impact on the recovery. Case numbers and hospitalizations have been ticking higher in certain parts of the U.S. and world as the Delta variant spreads.

Investors also were monitoring a regulatory clampdown by China on various companies. Chinese stocks fell again Tuesday after Beijing announced enforcement measures on technology and real estate and was reported to be considering restrictions on for-profit education ventures. Authorities say they need to protect public safety and financial stability, restrain surging housing costs and promote social welfare. But as mentioned above, they finally did show some stability which is what helped our market stabilize off of its worst intraday levels.

Many companies that have reported quarterly results in recent weeks have cited the impact of inflation on their costs. Yesterday, GE ( higher) and SWK (lower) mentioned these higher costs. This raises the question of whether companies will be able to implement price increases to cover the increase in costs.

UPS declined sharply after its revenue for the latest quarter fell short of analysts’ forecasts. Both TSLA and Dow component 3M fell after what appeared to be solid results on the old buy the rumor, sell the news syndrome.

July Consumer Confidence rose for the sixth straight month to the highest level since February 2020 and the IMF said that it expects the global economy by expand by 6% this year which would be a dramatic bounce-back from the 3.2% contraction in the pandemic year of 2020.

This week will be the largest one for second-quarter earnings, which are now projected to be ahead by 74% over last year. The lineup is as follows: yesterday –  GE, BSX, FISV, RTX higher while UPS, TSLA, SWK and  SHW lower; today – Dow components MCD, V, and AAPL lower in addition to SBUX, TDOC, JNPR, CAKE, MCO, SHOP,HUM and CB while GOOG, MAT, SIX and Dow components BA and MSFT are higher; tonight – ALGN, FB, F, LRCX, PYPL, XLNX, NOW and QCOM;  Thursday – AMZN, MA, Dow component MRK, MO, GILD; Friday – Dow components CAT, CHV and PG plus XOM, WWY.

Economic reports include: yesterday – June preliminary durable goods orders were up by 0.8% after May numbers were revised higher, ex-transportation they were ahead by 0.3% while ex-defense capital goods were up by 0.5%, July Consumer Confidence rose to 129.1 for the sixth straight monthly advance and which was the highest since February 2020, CaseShiller May Home Price Index rose to a record at a 16% gain; Wednesday – Fed latest policy decision at 2pm today; Thursday – weekly jobless claims, first estimate of 2Q G.D.P.; Friday – June personal income and spending.

Donald M. Selkin

Chief Market Strategist

 

Don Selkin is the Chief Market Strategist at Newbridge Securities Corporation, member FINRA/SIPC and provides the Fair Value analysis for CNBC each morning. The commentary provided in this Market Letter is intended to provide our customers with timely market analysis and should not be considered a research report. This Market Letter may contain and is limited to: Discussions of broad- based indices; Commentaries on economic, political or market conditions; Technical analyses concerning the demand and supply for a sector, index or industry based in trading volume and price; Statistical summaries of multiple companies’ financial data, including listings of current ratings; and, Recommendations regarding increasing or decreasing holdings industries or securities. This Market Letter does not make a financial or investment recommendation or otherwise promotes a product or service of the firm. This Market Letter contains only news, facts, and commentary on information previously reported from a news source believed to be accurate and reliable by the author. These news sources include the following: {Bloomberg Financial, Reuters, Associated Press}. It is possible that at any given point in time, the author, Newbridge Securities, or one or more of its employees or registered individuals associated with Newbridge Securities, may hold a position, either long, or short, as well as options, bonds, or other instruments in the companies noted in this report.