Daily Market Notes: 3-24-2021

How many times do I have to say that when the VIX gets to low levels as it did on Monday, the market really has little chance to go higher and we saw this last week as well as a VIX in the low 19’s last Wednesday caused the weakness the following two days and the 18.88 print on Monday gave stocks little chance to go higher yesterday.

So what we saw was a further attempt to go back into some of the former technology high-fliers and stay at home stocks and out of the financials, industrials and travel stocks that had done so well as the Dow never had a chance yesterday while the Nasdaq was attempting to do better in the morning before it too gave way in the afternoon.

The Dow was moderately lower before collapsing around 1:15pm during the joint testimony of Treasury Secretary Yellen and Fed Chair Powell, although it did not seem like anything they said had anything to do with the selloff. In any event, the Dow ended 308 points lower at 32,423 led on the downside by the ones that had done so well lately, namely BA, CAT, DIS, GS and HON and how can these issues just keep going up like they have with no profit-taking?

The S&P tried to do better early because it contains some of the large technology issues that tried to end higher such as AMZN, GOOG and NFLX. It was actually ahead by as much as 9 before that early afternoon collapse as well and ended at down 30 to 3910.

Ditto for the Nasdaq which was higher by 28 but then also gave it up and ended down by 150 to 13,227. This was surprising in that with lower 10-year Note yields, this should have been supportive of these types of stocks because they went down so sharply when yields were rising for the last couple of weeks. The yield fell to 1.63% which once again should have been bullish for the high-fliers although some of them did make gains as mentioned above.

The hero of 2021, namely the Russell 2000 Index of small stocks, really got clobbered for its worst loss since last June with an 81 point comedown to 2185. At least the VIX rose during this overall index selloff and ended at 20.30.

Investors continue to be focused on the future outlook for the U.S. economy as millions of Americans get vaccinated every day. Investors are wavering between optimism that coronavirus vaccines that might allow business and travel to return to normal and fears of higher inflation after struggling economies were flooded with credit and government spending.

The price of U.S. crude oil came down again to $57.76 a barrel, which pulled some energy companies lower. Energy prices have been steadily climbing this year until recently, as the global economy recovers and oil demand worldwide increases while production remains constrained.

The S&P hit a pandemic-era low exactly one year ago on March 23, 2020, having dropped nearly by 34% in about a month, the steepest such decline in that period of time in history. That wiped out three years’ worth of gains. The index wound up roaring back in the coming months and recovered all its losses by August. Through Monday, it had surged 76% from that low point.

AZN fell by 3.5% after U.S. authorities said that the drug company’s COVID-19 vaccination trial data contained “incomplete” information, which may impact its efficacy. Its vaccine is being primarily used in Europe.

This week sees a few earnings reports before the start of the first-quarter reporting season in April, two weeks away. The lineup is: today  – WGO higher and ADBE, GME, GIS lower; tonight – KBH, RH; Thursday – DRI.

Economic reports will have: yesterday – February new home sales fell by 18.2%; today –  February durable goods orders fell by 1.1% overall and non-defense capital goods orders excluding aircraft were lower by 0.8%; 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.