Daily Market Notes: 3-16-2021

In one of the strangest session lately in this ongoing streak of record-breaking performances by the Dow, S&P and Russell 2000 Index of small stocks, things started out modestly higher yesterday, then plunged in the late morning before recovering in the afternoon with an astounding last 25 minute upward surge that had to be seen to be believed.

The Dow began with modest gains, then plunged to a fast 157 point loss at 11:40am, from which level it went positive about an hour later to a gain of 29 points at 3:35pm when in one of the great last 25 minute rallies ever, it exploded to the upside to finally end at a further record high of 174 to 32,953. This was its seventh straight advance and its sixth record high close in a row. And this took place without those stocks that seem to go higher every day and this includes the likes of BA, GS, JPM and DIS.

The S&P followed the same pattern, with a nominally higher start, then a fast plunge to a 20 point decline at 11:40am, followed by a return to positive an hour later and ahead by 5 points with 25 minutes to go. This then resulted in one of the great upside explosions ever in that final time period with a new record close of up 25 to 3968. It was the fifth straight advance for this one.

And how about the Nasdaq, which was sharply lower as well until a late rally got it nicely higher for a change to a final gain of 140 up to 13,459. Some of the recent weak recovery items such as AAPL and TSLA finally got it together which helped the advance but it still lacked the upside explosiveness of earlier this year and late last year and we all know what the problem is here, namely the negative effect of those higher interest rates on the richly-priced growth technology issues.

And the Russell 2000 Index of small stocks quietly also pushed its way to a record with a 7 point advance to 2360. And how about the VIX, which got intraday .down right to its support level under 20 at 19.87 and ended lower at 20.03. So this will now become a test of whether the market is going to take a breather here or continue to push to new records as this is sort of a make or break area of support for this item.

Investors continue to eye the bond market, where yields pulled back a bit from Friday’s sharp increase with the 10-year at 1.61%. Investors are also focused on the recovery of the U.S. and global economies from the coronavirus pandemic. The $1.9 trillion aid package for the U.S. economy has lifted investors’ confidence in a strong recovery from the pandemic in the second half of the year, but also raised concerns about a potential jump in inflation.

President Biden’s pledge to expand vaccine eligibility to all Americans by May 1st  should also translate into faster economic growth.

Some economists fear that inflation, which has been dormant over the past decade, could accelerate under the extra demand generated by a surge in government spending. Others disagree, pointing out that there are 9.5 million fewer jobs in the American economy than there were before the pandemic hit, and argue that unemployment will keep a lid on inflation.

Airline and other travel stocks were the big winners with UAL up by 8% for the biggest gain in the S&P, followed by AAL and JBLU. The rally in airline stocks came as the Transportation Security Administration screened more than 1.3 million people both Friday and Sunday, the most since the coronavirus outbreak devastated travel a year ago. Cruise operators, whose shares have been pummeled over the past year, also had a good day.

Also perhaps helping was the fact that two “disruptive” items cooled off, namely the shares of GME and Bitcoin as well, and this might have allowed investors to enter into more traditional types of investments, so to speak.

Markets got a mixed message from China. It has led the global recovery, re-opening earlier than other countries from coronavirus shutdowns following the disease’s emergence in the central city of Wuhan in early 2020.

Retail sales there jumped by nearly 36% year-on-year in January-February from a year earlier. The outsized gain benefited from a flattering comparison with the low level of activity during last year’s shutdowns. Meanwhile, China’s jobless rate rose to 5.5% from 5.2% a year earlier, possibly affected by flare ups of coronavirus in some areas.

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: tonight  – COUP, CRWD, LEN; Wednesday – CTAS and FIVE; Thursday – CAN, DG, FDX and Dow component NKE.

Economic reports will see: yesterday – March Empire New York State Manufacturing Survey rose to 17.4; today – February retail sales which were lower by 3% and excluding food and energy were down by 2.7%, both numbers below expectations, February industrial production and capacity utilization were also weak with readings of -2.2% and 73.8, the lowest since last April, March NAHB Housing Market Index slipped a bit to 82; 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.