Daily Market Notes: 4-21-2021

For the second day this week, the major averages yesterday found that the air at higher levels resulting from last week’s records is a bit thin and as a result they just drifted in lower ranges all session but did find some support at the intraday worst levels and were able to finish above them.

For instance, the Dow ended down by 253 to 33,821 after having been off by more than 360. It was hurt by a large decline in BA, which always seems to go in the same direction as the Dow, in addition to large losses in financials such as GS, JPM and AXP after their journeys to record high levels lately. In addition, CAT and NKE were also lower. On the other hand, earnings-related gains in IBM, JNJ and PG provided support, in addition to health-care items such as AMGN And UNH.

Ditto for the S&P which was able to end more than 10 points off of its worst intraday decline and finished down by 28 to 4135, hurt by losses in many of the large technology leaders. The Nasdaq suffered the same fate with a 128 point loss to 13,786 and it was hurt by selling in most of the old-time technology giants in addition to the trendy newer stay at home and cloud issues as well, which have now become very volatile on a day to day basis. It has now lost 50 of the 56 points gained during last week’s record setting time.

The Russell 2000 Index of small stocks had nothing going for it and ended sharply lower for the second straight day with a final decline of 44 down to 2188. And naturally the VIX loved this with a gain to 18.65 and the low of 16.25 reached on Friday’s record Dow and S&P highs might now stand as near-term support levels, preventing the indices from making new highs for the time being.

Bank stocks fell hard because of a decline in bond yields with the 10-year Note down to 1.56% from 1.60%. For at least one day, investors turned to defensive issues like utilities, real estate and consumer goods products such as CLX.

The market has been swaying between gains and record highs to pullbacks as investors weigh solid economic growth against the risks still posed by the virus pandemic. That push and pull will likely continue as vaccine distribution rolls on and various industries re-open.

We are in the middle of first-quarter earnings season with around 80 members of the S&P reporting their results this week as well as one out of every three members of the Dow. Investors will be looking to see if companies are recovering with the rest of the economy from the coronavirus pandemic.

While earnings are likely to drive the market’s gyrations over the next few weeks, investors remain concerned about whether companies are prepared to deal with the impact of higher interest rates should inflation become a problem. .

UAL slid by 8.5% after reporting a loss that was wider than analysts were expecting, and drug maker ABT fell 4% with revenue that was short of forecasts. KSU jumped by 15% for the biggest gain in the S&P after another Canadian railway company offered to buy the railroad for $33.7 billion, far higher than a $25 billion offer made by Canadian Pacific last month. And naturally AAPL declined after another new product introduction, this time more advanced iPads, and what else is new in this regard?

NFLX got slammed in the aftermarket after the video streaming pioneer said it added 4 million more worldwide subscribers from January through March, its smallest gain during that three-month period in four years. That was about 2 million fewer than both management and analysts had predicted that they would add during the first quarter. We will see the negative effect of this on the Nasdaq and other technology stocks in today’s trading.

The market is now heading into the busiest two weeks of the earnings reporting season as this week alone there are 81 S&P companies reporting which includes 10 Dow components. The lineup is as follows: yesterday –  Dow components IBM,TRV, JNJ and PG higher while PM and ABT were lower;  today – NFLX, ANTM and Dow component VZ lower while ISRG, NDAQ are  higher; tonight – CMG, LRCX, WHR, SAVE and LVS; Thursday – Dow components DOW and INTC plus AAL, T, FCX, LUV and UNP; Friday – Dow components AXP and HON plus KMB and SLB.

Economic reports include: Thursday – weekly jobless claims, March existing home sales, March L.E.I; Friday – March new home sales.

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.