Daily Market Notes: 4-27-2021

The market did very well yesterday as the S&P was steadily higher all session and as a result it ended with a closing gain of 7 and eked out a closing record at 4187, finally overcoming the previous high from a week ago Friday.

The Dow on the other hand, went into reverse from a strong start of 208 point up with a slide into negative territory at 1pm and then a lower afternoon to end at down 62 to 33,981. This was due to declines in members HD, HON, MCD, 3M, and UNH, all of which have done well this year and are certainly entitled to a bit of a rest, in addition to PG which has done nothing except go lower for the last few sessions. These losses offset good gains by AXP, BA and GS.

The star of the day was the Nasdaq, which finally closed at its best level ever due to strength in the technology leaders and mainly by a large gain in AMZN ahead of its earnings with an extremely large advance on rumors that they will announce a 2 for 1 split on Thursday, the day that they are expected to report. The index began with only a 3 point advance and then accelerated steadily as the session moved along and ended up 122 to 14,139.

That technology rally, which had powered much of the market’s gains in 2020, helped push the Nasdaq to its first record high since February 12th. The index then proceeded to decline by 11%  from that peak by March 8th, thereby entering into a correction, and now with yesterday’s gains it has now recouped all of its losses from that March slide.

The Russell 2000 Index of small stocks did well again with a 26 point advance to 2298 while the VIX for some strange reason actually had  the nerve to go a little higher at 17.64. So here you have the strange situation where the S&P is now higher than it has ever been while the VIX is also above that 16.35 low that it reached on the previous S&P record from a week ago Friday. This means that the S&P has more room to gain from these levels until the VIX were to try to test support again at those lower levels, or the VIX participants sense that some sort of setback is coming soon.

This is the start of the busiest week for earnings so far this season, with 181 S&P members reporting in addition to another 10 Dow components also releasing their results (see below).

With millions of vaccines going out daily and trillions of dollars’ worth of government-led economic support being paid out, investors have turned much of their attention to how well the global economy, and along with it company earnings, will do in the recovery. Profits are expected to be higher by 24% from this time a year ago. Earnings growth is being welcomed by investors who have had to justify high stock values as many companies continue to emerge from a pandemic slump.

About a quarter of S&P 500 companies have reported quarterly results so far this earnings season. Of these, 84% have delivered earnings that topped estimates and are beating by wider margins than usual, namely around 23% versus the average beat of 9% average over the last five years.

Elevator and escalator maker OTIS climbed by 7% for the biggest gain in the S&P after beating analysts’ first-quarter profit forecasts. On the other hand, almighty TSLA is going to start out lower today following the release of the electric car maker’s quarterly results which were excellent but here is an example of a stock that might have gotten ahead of itself in terms of a very high price/earnings multiple. And let it also be remembered that there have been earnings-related selloffs in other important stocks lately, the most prominent one being NFLX, in addition to Dow components AXP, HON and INTC plus WHR.

The bond market remained relatively stable with the yield on the 10-year Treasury note rising to  1.57% from 1.56% on Friday. Yields have remained in this narrow range for the past several days, which is a respite for investors after dealing with higher volatility in the bond market earlier this year.

Investors will be looking to what the Federal Reserve has to say at its Wednesday 2pm announcement and subsequent press conference. There is still the expectation that rates will not change for several months and everyone will be looking for any guidance that the F.O.M.C. has to provide on their thoughts about inflation and the economic recovery.

In addition, the market will be focused Wednesday evening on President Biden’s prime-time address to Congress and what new details it may bring on plans for an infrastructure package and tax reform.

Meanwhile, the price of Bitcoin rose 9% to $53,877 after its sharp selloff from the $63,000 level as recently as last week.

This week will see the following among others reporting: yesterday  – ACI lower and OTIS higher; today – TSLA, GE, LLY, HAS, SHW and Dow component 3M are lower while UPS, RTX, JBLU and CROX are higher; tonight – Dow components MSFT, AMGN and V  plus GOOG, SBUX, AMD, FEYE, TXN, MDLZ, COF, PINS;  Wednesday – Dow components AAPL and BA in addition to  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: yesterday  – preliminary March durable goods orders rose by 0.5% after a 0.9% decline the prior month; today – April Consumer Confidence rose to a post-pandemic high of 121.7; 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.