Daily Market Notes: 3-26-2021

In another bizarre day yesterday, the major indices reversed what had become a familiar pattern over the past six days by instead of fading lower into the close, things extended their gains from early awful selling to end predominantly higher.

After Wednesday’s miserable afternoon collapse, the major indices were sharply lower in order to satisfy those who needed to sell at what turned out to be the lows. For instance, the Dow had the nerve to decline by another 349 points at 11am and this was followed by the S&P which was off by 36. And then throw in the Nasdaq at lower by 176 and you had the makings of another terrible session.

But then, miracle of miracles, at those low points and with a VIX at 23.55 versus the low 19’s the day before, investors felt that the market became oversold enough for things to be subject to some bargain hunting and up, up and away things went with the result that the Dow turned that 349 point decline into a closing advance of 199 to 32,609.  It was led on the upside by BA, CAT while MSFT and NKE were lower once again. And despite all of the wild moves in both directions, as of now the Dow could be turning in its best monthly showing since last November while the Nasdaq is on track to end with its worst monthly performance since last September. On the other hand, things could change in the final four trading days of March.

Ditto for the S&P which reversed its 36 point loss into a final advance of 20 to 3909. The Nasdaq joined in the upside move with a final gain of only 16 because of ongoing weakness in former technology leaders which actually resulted in the Nasdaq 100 ending lower. This was due to the fact that such former stalwarts such as AMZN, BIDU, FB, NFLX, MSFT and NFLX had just awful days on a session that looking at the headline numbers, one would have thought that they would do better.

The Russell 2000 Index of small stocks also said enough is enough after its recent beating as it turned a morning loss of 34 into a final gain of 48, quite the reversal here as well. And how about the VIX, which got as high as 23.55 as previously mentioned and ended lower down to 19.81 as the major indices ended higher.

Treasury yields initially eased, with the 10-year Note down to 1.60% but then edged higher up to 1.63% following encouraging reports on weekly jobless claims and fourth-quarter U.S. economic growth.

Investors have been moving money away from expensive tech stocks as part of a broader shift to stocks tied more closely to economic growth. There’s a good chance the recovery could be surprisingly strong with little interference from the Federal Reserve. It is possible that the Fed is going to watch and let the economy grow at a hotter rate because their number one priority is unemployment.

The market has been mostly vacillating in place recently, with support for stocks coming from expectations that the economy will soar soon thanks to COVID-19 vaccinations and huge amounts of spending by Washington. A quick rise in interest rates has undercut stocks at the same time, though.

Weekly jobless claims fell to 684,000 which was the lowest level since before the pandemic erupted a year ago. The final estimate of 4Q 2020 G.D.P. growth was revised upward to 4.3%.

The market also saw the return of GME on the upside after four straight lower days with a weak earnings report sending the stock lower by 34% on Tuesday which was followed by a frenzied 57% move higher yesterday, go figure. And once again, the far out of the money upside calls saw the most trading volume with the strong probability that they will expire worthless today, depending on how this one closes at 4pm.

This week has seen a few earnings reports before the start of the first-quarter reporting season in April, two weeks away. The lineup is: yesterday – KBH, RAD lower and RH, DRI higher.

Economic reports will have: yesterday – weekly jobless claims fell to 684,000 and third and final estimate of 4Q G.D.P. came in better at 4.3%; today – personal income and spending fell by 7.1% and 1% respectively, final March U. of Michigan Consumer Sentiment Survey rose to 84.9 from 76.8 in February.

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.