Daily Market Notes: 3-30-2021

In a day that sort of represents what has been going on lately, the major indices were able to recover from their worst intraday losses, and once again the Dow finished at a record high while the technology-laden Nasdaq ended lower and is now 7% from its all-time high, which gets it closer to another 10% correction.

And once again, things sold off in the morning with the Dow reaching its worst level of the session at a 167 point decline at 11am. From there it put its head down and began to accelerate to the upside and actually reached an intraday high best level of 187 at 3:30pm before easing back into the close to end with a final advance and new record level of plus 98 to 33,171. This easing back in the last half-hour was in sharp contrast to what happened on Friday when it made a historic upside acceleration late to close with that huge 453 point gain. It was helped this time by advances in BA, MCD, PG and UNH.

The S&P followed a similar path with an increase from its worst intraday level of down 31 to a 7 point gain at 3:30pm when instead of accelerating further as it did on Friday, it eased back to end with a nominal closing decline of 3 down to 3971. The weak Nasdaq also improved from its worst morning level as well but there was too much negativity in the former stay at home leaders such as ZM and ROKU despite some advances in FB, GOOG, AMZN,  NFLX, NVDA and BKNG to ever get it positive and it ended with another decline down to 13,059, a loss of 79.

And the Russell 2000 Index of small stocks took it on the chin once again to end with a 63 point loss to 2158 even though it is still clinging to being the best performer so far in 2021. In fact, it is now on track to post its first monthly decline since last September, which has indeed been a very good upside run.

The VIX could not sustain itself at support levels under 19 on Friday and rose a bit to 20.74 which once again keeps it in the same old range and does give the market a little more room to advance before it sets back under 19 once again at which time equities will probably ease again, and what else is new?

Banks had some of the sharpest losses amid worries about how much pain they will incur after a disastrous margin selling incident made by a major hedge fund. In addition, technology stocks here fell as China announced more tax breaks to bolster its own chip sector.

The market’s movements mark the latest ebb, which has been mostly climbing in a series of stops and starts. Supporting the market have been rising expectations that a supercharged economic recovery is on the way thanks to COVID-19 vaccinations, immense spending by the U.S. government and continued low rates from the Federal Reserve. Weighing on stocks at the same time, though, are worries about a coming rise in inflation and possibly too-ebullient prices across some sectors of the market.

Tomorrow, President Biden will give details about his proposal to rebuild roads, bridges and other infrastructure. Shares of raw-material producers have rallied recently on rising expectations for infrastructure spending by Washington, even though many past presidential administrations have failed to make it happen.

Yesterday, though, the market’s spotlight was squarely on financial companies after Japanese bank NMR and Swiss bank CS said that they are facing potentially significant losses because of their dealings with a major client, though the exact magnitude is still unclear. The former  estimated the claim against its client could be about $2 billion.

Credit Suisse said that it “and a number of other banks” are exiting trades they made with a significant U.S.-based hedge fund, which defaulted on a margin call last week. Neither bank named the client, but news reports identified it as New York-based Archegos Capital Management.

Shares of both banks each fell at least 16% in their home countries, and U.S. banks got caught in the downdraft as investors question whether the soured trades will stay isolated or have a more widespread effect through the system.

Among the winners was Dow component BA, which rose 2.3% after LUV said that it will order 100 of the 737 MAX airplane. Regulators in the United States and other countries have cleared the plane model to resume flying, after it was grounded worldwide in 2019 after two crashes that killed 346 people.

Bond yields rose, which hurt technology overall as well with the 10-year Note up to 1.71% and this negatively influenced gold which sold off down to $1,710, inflicting more pain on its legions of fans while Bitcoin takes away the spotlight from the former precious metal.

This week sees some earnings before the floodgate of first-quarter reports starts next week. The lineup is as follows: yesterday – CALM lower; today – FDS lower and PVH higher, tonight  – CHWY, LULU;   Wednesday – MU and Dow component WBA; Thursday – KMX.

Economic reports will have: today – January CaseShiller Home Price Index rose by 11.2% which was the highest ever, March Consumer Confidence rose to 109.7 which was the highest since March 2020; Wednesday – March Chicago Purchasing Managers’ Index, February pending home sales; Thursday – weekly jobless claims, ISM March Manufacturing Index, February construction spending; Friday when the market is closed for Good Friday observance – March jobs reports which is expected to show a gain of 525,000 versus February advance of 379,000.

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.