Daily Market Notes: 3-15-2021

This market seems to want to go higher despite any kind of news that might be interpreted as negative, as for instance unlike other days last week when there was some late fade and profit taking from the mid-afternoon highs into the close, on Friday the indices actually pushed higher at the end of the day and finished at their best levels of the session.

The Dow was drifting at better levels of around 240 up most of the day when in the last hour it got a second wind and ended at a closing advance of 293 to a new record high of 32,778. And once again it was led by strength in BA, CAT, GS and UNH. This was its sixth straight advance and its best week since November.

The S&P, which was weighed down by weakness in former large technology leaders, was trading lower for most of the session by around 5 points, also got a late upside kick to end with a gain of 4 to a new record as well at 3943. It achieved its second straight weekly gain in the process.

The Nasdaq finally broke a three-week losing streak and this was courtesy of its 464 point upside moonshot on Tuesday but it seems like rallies in the former technology leaders are weak and not sustainable at the current time, almost like one-day reprieves from the bear market conditions that many of them are in, as investors shift their attention to the cyclical value plays like financial, material, energy and travel companies. It ended lower on the day by 79 to 13,319.

The Russell 2000 Index of small stocks also rose to a record close at 14 to 2353 and has been the upside leader so far in 2021 with an 11% advance. The VIX eased back and is now at 20.69 which is starting to get closer to its near-term support under 20.

And once again, the neurotic obsession with bond yields was the dominant force in pulling tech stocks mostly downward, because as yields push interest rates higher, they make high-flying stocks look expensive. After remaining stable for most of the week, the yield on the 10-year Note made a large jump to 1.62% from 1.52% a day earlier. Investors had sold off stocks late the prior week after that yield crossed above the 1.60% mark.

The increase in bond yields comes as President Biden signed into law the $1.9 trillion stimulus plan, which will include $1,400 checks for most Americans as well as additional payments for those with children or those who collected unemployment benefits last year. He also laid out a plan, in a primetime speech Thursday, to expand vaccine eligibility to all Americans by May 1st.

These moves have given investors confidence that the U.S. and global economy will likely experience a strong recovery in the second half of the year as well as potentially increase the rate of inflation.

The February P.P.I. rose by 0.5% following a record jump of 1.3% the month before. Over the past year, wholesale prices are up 2.8%, the largest 12-month gain at the wholesale level in more than two years. The core rate excluding food and energy was up by a more moderate 0.2% for a gain of 2.5% year over year.

Some economists fear that inflation, which has been dormant over the past decade, could begin to rise under the extra demand generated by the government’s new $1.9 trillion stimulus package. Others disagree, pointing out that there are 9.5 million fewer jobs in the American economy than there were before the pandemic hit a year ago, and argue that unemployment will keep a lid on inflation.

Meanwhile, shares of big banks have climbed. Banks are often a proxy for the broader economy, as the ability for borrowers to repay debts matters to banks’ balance sheets and higher interest rates means they can charge more to borrowers. The KBW Bank Index of the 24 largest banks rose 1.7% and is up by 26% this year.

Investors got another piece of data that showed that American consumers are feeling increasingly confident about returning to normal, and hopefully returning to their old spending habits. The University of Michigan consumer sentiment index for mid-March came in at a reading of 83.0, up from 78.9 at the end of February.

The price of crude oil steadied at $65.50 a barrel while gold sank again on the rise in interest rates and ended just under $1,700, well off of its record high of over $2,000 earlier this year.

Earnings for the fourth-quarter of 2020 are just about done and we will soon start to see results for the first-quarter of 2021 for those companies whose fiscal quarter ended on January 31st. The lineup is as follows: Tuesday – CRWD, LEN; Wednesday – CTAS and FIVE; Thursday – CAN, DG, FDX and Dow component NKE.

Economic reports will see: today – March Empire New York State Manufacturing Survey rose to 17.4; Tuesday- February retail sales, February industrial production and capacity utilization, March NAHB Housing Market Index; Wednesday – February housing starts and results of F.O.M.C. interest rate meeting; Thursday – weekly jobless claims, February L.E.I.

Donald M. Selkin

Chief Market Strategist

 

Disclosures:

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 current or potential 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 analysis 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 in particular 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, and 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 mentioned in this report.