Daily Market Notes: 4-26-2021

In a day that was remarkably similar to last Wednesday, the market did almost the exact thing on Friday as after a sharply lower session it started a bit lower and then pushed higher for the remainder of the day to end the week little changed, although slightly to the downside after the previous Friday’s record Dow and S&P closes.

The Dow began with a fast 102 point decline in order to satisfy those who wanted to sell after Thursday’s sharply lower session. Once that selling was over with, this index took off again to the upside as it did on Wednesday and got as high as a 328 point advance at 3:35pm before easing back into the close for a final advance of 227 to 34,043. It was restrained on the upside to some  extent by earnings-related declines in AXP, HON and INTC. On the other hand, gains in the rest of the financials, BA and MSFT provided good upside support.

The S&P started out just about unchanged and from there it was able to reach a large gain of 59 points at that same time, which would have been a record high close and a gain for the week before some late selling eased it back a bit to a final gain of 45 to 4180, just 5 points shy of the previous record one week earlier.

The Nasdaq was always positive and it also reached its best level of the session at the same time before it closed with a final advance of 198 to 14,016. It was led in this endeavor by most of the large technology stocks which went back and forth for the entire week. The Russell 2000 Index of small stocks also did well and finished with a closing gain of 39 up to 2271.

The VIX, which has naturally gone in the opposite direction of the market each day this past week ended lower at 17.33 which is still above its 16.35 close the previous Friday on the record gain for the Dow and S&P.

So after all of the volatility back and forth each day, the Dow and S&P ended lower for the first time after four straight higher weeks.

In addition to the three lower Dow components, KMB, the maker of Huggies diapers and other consumer products, fell by the most since last October after the company reported disappointing results.

Corporate earnings have been mostly positive, but investors are weighing economic growth against threats from the pandemic and worries about changes in tax policy.

The market has been in rally mode in recent weeks as the rollout of COVID-19 vaccinations, the massive support from the U.S. government and Federal Reserve, and a string of encouraging economic data fuel expectations for a stronger economy and solid corporate profit growth this year.

About a quarter of S&P companies have reported quarterly results so far this earnings season. Of these, 84% have delivered earnings that topped estimates. Earnings are also blowing away analysts’ forecasts by a wider margin than average, coming in 23% above the estimates versus the 5-year average of 9%.

Traders bid up shares in several companies Friday that reported quarterly results that beat  estimates. Barbie-maker MAT added 1%, SNAP gained 7% and SAM advanced by 3%.

Investors are also weighing the implications of President Biden’s plans to introduce higher capital gains taxes to help pay for the increased government spending to help the economy recover from the pandemic.

Higher taxes on capital gains would make stocks marginally more expensive in the long term, which might impact the market’s overall valuation. Despite millions of Americans having their retirement funds in the stock and bond markets, most stocks are owned by the wealthiest Americans.

Meanwhile, the price of Bitcoin dropped about 2% to $50,675 Friday after it had traded for as much as $63,000 as recently as last week. And COIN reached a new low at $292 after it had traded as high as $429 as unfortunately for those who bought at the higher levels, it was introduced for public trading when Bitcoin itself was at its highs.

The yield on the 10-year Note rose to 1.57%, crude oil rose a bit to 62.14 a barrel while gold eased back to $1,776 an ounce.

This week will be the busiest one for the reporting period with around 180 S&P companies giving their results and the most prominent ones will be as follows: today – ACI lower; tonight – TSLA; Tuesday – Dow components AMGN, MSFT, 3M  and V plus AMD, GOOG, GE, RTN, YXN, SBUX and UPS; Wednesday – Dow components AAPL and BA plus CME, EBAY, FB, F, QCOM and SHOP; Thursday – Dow components CAT, MCD and MRK plus MO, AMZN, BMY, MA, NEM and TWTR; Friday – Dow component CVX plus COL, XOM.

Economic  reports will see: today – preliminary March durable goods orders rose by 0.5% after a 0.9% decline the prior month; Tuesday – April Consumer Confidence; Wednesday – results of F.O.M.C meeting; Thursday – weekly jobless claims, March pending home sales; Friday – March personal income and spending, final U. of Michigan Consumer Sentiment Survey, April Chicago Purchasing Managers’ Index.

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.