Daily Market Notes: 3-22-2021

In what had to be one of the most maneuvered closings lately, the so-called “quadruple witching hour” expiration on the third-Friday of each successive quarter, namely March, June, September and December lived up to its reputation for surprises as the Dow, which was under moderate pressure all session turned a 79 point loss at 3:36pm into a more serious close at -234 to 32, 628 for no apparent reason other than these end of quarter maneuvers. The Dow was weak because of negative reversals in the stocks that had been doing so well lately on the rotation into the so-called value and re-opening types of stocks such as CAT, GS, HON, JPM and NKE because of a poor earnings report.

The S&P was the really strange one as it turned a gain of as much as 14 points into a closing decline of 2 down to 3913. It had reached a record high on Wednesday and posted its first weekly decline in three weeks.  The Nasdaq, on the other hand, was trying to do better on a one-day shift back to some technology and stay-at-home issues after the bear market beatings that many have taken since their mid-February highs and it ended better by 99 to 13,215. This does not obscure the fact that it has been lower for four out of the past five weeks, and in the immortal words of Bob Dylan – “You don’t need a weatherman to find out which way the wind is blowing!”, despite the ongoing bullishness of a good part of the analyst community, especially toward the shares of AMZN with price targets of 4000 and 5000 next year despite the fact that it made a high of 3550 in early September and has done absolutely nothing since then, trading in a range of under 3000 to around 3300.

The Russell 2000 Index of small stocks gained 20 points up to 2287 as all of the main indices ended lower for the week. Despite this mixed to lower day, the VIX came down once again to 20.95 as it has bounced around in a narrow range of tremendous support in the 19’s to resistance in the mid to high 20’s.

The 10-year Note inched up to 1.74%, below the more than one-year high of 1.76% attained in the past couple of days. Higher yields put downward pressure on stocks generally, in part because they can steer dollars away from the stock market and into bonds instead. That makes investors less willing to pay as high prices for stocks.

Bank stocks fell after the Federal Reserve announced it would end some of the emergency measures put in place last year to aid the financial industry deal with the pandemic. The move will restore some of the capital requirements for big banks that were suspended in the early months of the viral outbreak in order to give banks flexibility. The banking industry had hoped those measures would be extended.

The Dow was also hurt by declines in the shares of V, which fell by 6% for the worst decline in the S&P following reports that the Justice Department is investigating the company over its debit card practices. MA fell in sympathy by 3%.

There are concerns that the rise in bond yields could be a harbinger of inflation. Fed officials said earlier this week that they may let the U.S. economy “run hot” for some time in order to not stymie the economic recovery as the pandemic eases.

Shares of FDX made a nice gain of 6% after the company reported earnings well above analysts’ estimates. On the other hand, Dow component NKE fell by 4% after the athletic apparel company said pandemic-caused congestion at ports caused sales to slow in the last quarter.

Crude oil rebounded from a dip under $60 a barrel on Thursday and broke a five-day losing streak for its worst showing since October and ended at $61.42 a barrel.

This week sees a few earnings reports before the start of the first-quarter reporting season in April, two weeks away. The lineup is: Tuesday – ADBE and GME, which should be interesting due to all of the wild gyrations that this one has shown these past few months; Wednesday – GIS, KBH, RH; Thursday – DRI.

Economic reports will have: today – February existing home sales fell by 6.6%; Tuesday – February new home sales and building permits; Wednesday – February durable goods orders; Thursday – weekly jobless claims and third and final estimate of 4Q G.D.P. at 4.1%; Friday – personal income and spending, final March U. of Michigan Consumer Sentiment Survey. 

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.