Daily Market Notes: 3-17-2021

The astounding record streaks of the Dow, S&P and Nasdaq came to a quiet end yesterday as a VIX that is getting too low to support much further advances turned early gains into slight closing declines for these three measures that had done so well lately.

The Dow’s record streak of six consecutive record high closes and seven higher days in a row came to an end as it could never really get it together and was under pressure all session until a final decline of 127 to 32,826. It was led on the downside by those issues that were doing so well on the re-opening value types of names such as AXP, BA, CAT, GS and JPM. In fact, BA has an almost 100% correlation of its movements either up or down to that of the Dow itself.

The S&P did better earlier with a morning gain of as much as 13 to an afternoon loss of 15 before ending with a whimper at 6 down to 3963. The Nasdaq was sort of the hero of the day for a change as it was able to eke out a 12 point advance to 13,471 led by of all things, the formerly beloved FAANG group. On the other hand, those newer types of stocks that had done so well on the stay at home dynamic for most of last year and earlier this year did poorly, and this former high-flying group included DOCU, PTON, MSTR, BKNG and TSLA. Travel stocks were also weak after their nice gains on Monday. Energy stocks were also lower on a drop in the price of crude oil to around $64.45 a barrel.

The Russell 2000 Index of small stocks, which has led the upside this year, did poorly yesterday with a 40 point decline down to 2319. As mentioned, the VIX still managed to end lower at 19.79 and either it is going to continue to break support or the market could be in for a further setback and of course this will depend on what the F.O.M.C. has to say at 2pm today.

Some economic reports came in poorly, which could influence what the Fed has to say as February retail sales fell by 3% as consumers cut back on spending last month, partly due to bad weather in parts of the country that kept shoppers away from stores, and partly due to their December and January stimulus payments running out. February’s drop followed soaring sales in January as people spent $600 stimulus checks sent at the end of last year. In fact, the January number was revised upwards to 7.6% from its previously reported rise of 5.3%.

Meanwhile severe winter weather pushed industrial production down by a sharp 2.2% in February, reflecting a big decline in factory output while capacity utilization fell to 73.8. And March home builder sentiment fell by 2 points to the lowest in seven years.

Investors are betting big that this economic malaise will dissipate as spring arrives for most of the country and more Americans get vaccinated. Further, President Biden’s administration started sending out $1,400 stimulus checks to individuals last weekend. On the other hand, some investors fear the stimulus could translate into inflation down the road. .

As mentioned, investors will be closely watching the Federal Reserve’s latest economic and interest rate projections this afternoon. Economists expect that Fed Chair Powell will try to convince jittery financial markets that even as the economic picture brightens, the central bank will be able to continue providing support without contributing to higher inflation. Many investors envision a swift and robust recovery later this year that could accelerate inflation and send long-term rates higher.

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: today  – COUP and LEN lower while CRWD and LE are higher; tonight – CTAS and FIVE; Thursday – CAN, DG, FDX and Dow component NKE.

Economic reports will see: yesterday –  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; today –  February housing starts and building permits, which are a future measure of activity, both came in well below consensus at declines of 10.2% and 10.8% respectively; 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.