Daily Market Notes: 4-15-2021

Well, how do you like that, namely that the major indices did a complete reversal yesterday from what they did the day before, as after losing ground on Tuesday, both the Dow and the Russell 2000 Index of small stocks rose, while the S&P and Nasdaq, which both were higher on Tuesday, ended lower.

The Dow had been helped by a very strong advance in GS after its earnings report, in addition to gains in CAT and TRV. In fact, it was up by a strong 234 points by late morning but the problem was that the Nasdaq was negative all day and got worse as the session moved along. So when this discrepancy between the two indices is that apparent, the market invariably moves in the direction of the latter, because it is so much more populated than the former.

So as a result of the Nasdaq weakness, the Dow gave up most of that gain to finally end with a closing advance of only 53 to 33,731.

The S&P was higher by 10 points in the morning on that strong Dow performance but then really got hit as the large-cap technology leaders sold off and as a result it faded late in the session to end with a closing decline of 17 down to 4124.

The Nasdaq was negative all day and just kept sliding as the session moved along and ended with a closing decline of 138 down to 13,858 hurt by not only the FANG leaders but also by severe selling in those stay at home stocks which did well the day before. And the Russell 2000 Index of small stocks finally showed a gain for the first time this week as it rose by 19 to finish at 2248.

The VIX moved higher on this overall selling and ended at 16.99, still on the tame side as the overall trend in the market has been to the upside these past few weeks.

Shares of COIN, a marketplace for bitcoin and other digital currencies, began trading at $381 after the Nasdaq earlier gave it a $250 reference price. It quickly rallied toward $430 before closing at $328.28, which means that practically everyone who bought it yesterday was showing  paper losses at the end of the session. But even at that price, investors say the company is worth more than $85 billion, more valuable than Nasdaq or Intercontinental Exchange, the owner of the New York Stock Exchange, go figure.

Interest in and prices for cryptocurrencies have been exploding recently as more companies and investors get involved. COIN turned a profit last year after more than reversing a $30.4 million loss from the year before, and it expects growth to continue because it sees the crypto economy producing “a more fair, accessible, efficient, and transparent financial system for the internet age.”

Energy stocks were also among the market’s strongest on expectations that a resurgent economy will burn more petroleum products. The International Energy Agency raised its forecast for oil demand this year, up by 230,000 barrels per day to 96.7 million. A separate U.S. government report also showed that inventories fell sharply last week and this helped crude oil rise by $2.97 to settle at $63.15 per barrel.

Stocks in recent earnings seasons have failed to get as big a bounce as they usually do after reporting better-than-expected results, which is probably a function of how much stock prices have already rallied on expectations for the strong growth. The S&P has soared by 85% since hitting bottom in March 2020, even as the pandemic crunched profits for companies through last year.

Yesterday’s encouraging start to earnings season (although not to the overall market) coincides with several reports showing the economy is kicking into a higher gear as more widespread COVID-19 vaccinations and tremendous financial support from the U.S. government and Federal Reserve work through the system.

The expectations for a stronger economy, though, are also leading to worries about higher inflation. If inflation were to climb and sustain itself, it could send bond prices tumbling, erode profits for companies and trigger volatility across markets worldwide. For instance, the March C.P.I. report said that prices rose more than economists had expected, but investors largely took it in stride.

Fed Chair Powell said again yesterday that the central bank will hold off on raising interest rates until the job market has fully healed, inflation has reached 2% and indications show inflation is on track to stay moderately above 2% for some time. The Fed also released its latest “Beige Book” survey, which showed businesses around the country are feeling more optimistic about the economy.

Profits for the first-quarter are now expected to grow by 24%, which would be the best one in more than a decade, compared with the view back in September that companies in the S&P would see 13% earnings growth.

The lineup is as follows: yesterday – BBBY and Dow component JPM lower while Dow components GS and UNH were higher, in addition to WFC; today – BLK, SCHW, C, PEP, USB, RAD higher and BAC, DAL lower; tonight – AA; Friday – BNY, KSC, PNC, MS.

Economic reports will have: yesterday – March import prices rose by 1.2%; Fed Beige Book (see above); today  – weekly jobless claims declined to a post-COVID low of 576,00 but last week was revised higher, advance March retail sales rose by 9.8% and ex-autos were 8.4% higher, April NY State Empire Manufacturing survey was up to 26.3, the highest in five years, April Philadelphia Fed Manufacturing Survey gained to 50.2, one of the highest levels ever, April NAHB Housing Market Index rose to 82, March industrial production and capacity utilization; Friday – March housing starts and building permits, mid-month 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.