Daily Market Notes: 3-31-2021

In another strange lower day yesterday, based on what I said was a VIX that was too low on Friday’s record close in both the Dow and S&P on that bizarre very late push, both the S&P and Nasdaq ended lower for the second straight session but the Nasdaq was able to show some strength in beaten-down issues that finally showed some signs of life after declines in excess of 30% in some cases.

The Dow was negative all day but tried to rise and was down by “only” 20 points at 3pm, at which time a vicious late selloff brought it to its lows of the day with final decline of 104 to 33,067 but let it be remembered that it was coming off of two straight all-time high record closes. It was hurt by declines in AMGN, MCD, MSFT, UNH and V while gains in financials and industrials like BA, CAT, GS and JPM helped limit the downside.

The S&P was lower early by 25 but was able to cut its closing losses to 12 down to 3958. The Nasdaq actually made a decent turnaround from its early decline of 137 to end only 14 lower at 13,045 and is in the process of putting in its worst week since last October. On the other hand, some of the issues that seemed lost with individual bear market declines in excess of 30% finally showed a pulse, and this group would include TSLA, ZM, ROKU and MELI. On the other hand, the FAANG group looks really lost, especially AAPL and AMZN, which just continue to drift lower.

The Russell 2000 Index of small stocks finally had a nice day after two very difficult ones with a gain of 37 up to 2196, so in a sense yesterday was a day when each one of these indices sort of did its own thing in their own individual direction, with a complete lack of coordination among them. The VIX actually ended lower, go figure on a mostly down day and finished at 19.61 which starts to get it closer to support once again.

Treasury yields moved up after the March Consumer Confidence report came in at 109.7 which was the highest since before the pandemic began and the CaseShiller Home Price Index moved up by 11.2% to the highest level ever. On the other hand, after reaching that 1.75% resistance level on the 10-year Note, it eased back a bit to end around 1.72%.

Meanwhile, President Biden is set to unveil details today about plans to spend what could be more than $3 trillion on infrastructure and other measures to help the economy and environment.

Despite the pressure on big tech stocks, most investors remain optimistic that the broader market can keep rising. A stronger economy thanks to COVID-19 vaccinations and massive spending by the U.S. government should help boost profits for many companies this year, particularly those like banks, energy producers and industrial companies.

Big financial stocks also climbed yesterday as investors see losses for the industry due to soured trades for a big U.S. hedge fund last week staying isolated to a few players, rather than cascading through the financial system. Japanese bank NMR and Swiss bank CS said Monday that they are facing potentially significant losses because of their dealings with a major client. Nomura estimated the claim against its client could be about $2 billion. Some estimates of the total losses are in the range between $5 billion to $10 billion.

The larger banks rose because it was reported that two financial giants were able to limit their losses by quickly selling stocks held by the hedge fund, which amassed big ownership stakes in companies using borrowed money. The banks have not named the fund, but reports have identified it as Archegos Capital Management.

And finally some of the issues that were dumped for large losses by this hedge fund stabilized as VIAC, DISCA and BIDU snapped a multi-day slump. These stocks had been coming down in a negative cascade, losing more than half their value from unsustainable highs reportedly as part of heavy selling related to the Archegos saga.

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

Economic reports will have: yesterday – 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; today – March Chicago Purchasing Managers’ Index rose to 66.3 which was the highest since July, 2018, February pending home sales were lower by 10.6%; 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.