Daily Market Notes: 4-30-2021

In a very volatile session yesterday, the major indices started out nicely higher yesterday, then collapsed back down to negative around mid-day from which level they pushed back to the upside once again and finally closed with the S&P at a new all-time high.

For instance, the Dow began with a 160 point advance from which it plunged to a 75 point intraday loss shortly after 12 noon. From there it decided that it liked the upside once again and finally ended with a closing gain of 240 to 34,066. It was led in this endeavor primarily by the financial issues.

The S&P followed the same pattern as it began with a 28 point gain, then also dipped negative shortly after 12 noon from which level it decided that it also liked the upside once again and finished sort of where it began with a closing advance of 28 to a  record 4211.

The Nasdaq jumped out strongly at the opening to a 150 point gain led by strong showings in FB and AAPL after their reports. It also dipped sharply in mid-day as well to a 98 point loss before rallying back but it ended well below that opening high as AAPL in particular faded from its opening advances and actually had the nerve to end with a small decline, and how do you like that after the market’s biggest cheerleader was falling all over himself with praise for this one, similar to how he did the same thing the day before with AMD, which returned the favor with a strong start of 5 points before giving these gains back and ending with a 1 point loss, go figure. The Nasdaq was also weakened by declines in TSLA, which really looks bad after its supposed “fabulous” earnings report on Monday evening, from which it has gone steadily lower all week. In addition, NOW, TDOC and CTXS also applied downside pressure which is why the index ended only 31 points higher, namely well below its opening upside gap.

The Russell 2000 Index of small stocks did little once again and ended 8 points lower at 2295. Despite the record gain in the S&P, the VIX actually had the nerve to end a little higher at 17.28, probably anticipating today’s final trading day of the month’s lower start.

Investors weighed the latest batch of company earnings reports and encouraging economic data. The initial estimate of 1Q G.D.P. came in at 6.4%, which was the latest piece of evidence  pointing to an economic recovery from the recession brought on by the pandemic. Other upbeat reports included March pending home sales higher by 1.9% after two months of declines. And weekly jobless claims continued to decline with 553,000 which is a post-pandemic low.

The rollout of COVID-19 vaccinations, massive support from the U.S. government and the Fed, and increasingly positive economic data have been driving expectations for a strong rebound for the economy and robust corporate profit growth this year. That has helped stocks push higher and kept indexes near their all-time highs.

Still, some of the risks to the market include rising inflation getting out of hand and any aspect of the virus pandemic worsening and throwing off the economic recovery. But so far, company earnings for the first three months of the year are largely exceeding expectations and stoking bullish profit outlooks for 2021.

FB jumped by 7% after the social media giant reported stronger-than-expected results for the first quarter thanks to soaring ad revenue. QCOM also did well after its report. AMZN last night also reported a strong quarter with profit tripling and should do well today.

On the other hand, auto companies fell sharply after F warned that a worsening global computer chip shortage could reduce its production by 50% during the current quarter. It was lower by 9% as a result and GM followed to the downside.

Ride-sharing and delivery service companies also dropped following a report that Labor Secretary Walsh wants gig workers to be classified as employees. As a result, DASH, UBER and LYFT also declined sharply.

In his speech on Wednesday evening, President Biden ticked off details of some of his plan for $1.8 trillion in spending to expand preschool, create a national family and medical leave program, distribute childcare subsidies and more. The plan comes on top of his proposal for $2.3 trillion in spending to rebuild roads and bridges, expand broadband access and launch other infrastructure projects.

The strong economic reports helped nudge bond yields higher with the 10-year Note at 1.64% from 1.62% the day before.

This week sees the following reports: yesterday  – FB, QCOM, KDP, CDCSA, TAP, KHC, DPZ, OSTK higher while Dow components AAPL, MRK and CAT lower in addition to EBAY, TREE, MO, TROW, SWI, MA, PCG ; today – AMZN, CL, ABBV and GT higher while SWKS, GILD, TWTR, CLX, XOM and Dow component CVX are lower.

Economic  reports will see: yesterday – weekly jobless claims fell to a post-pandemic low of 553,000; initial estimate of 1Q G.D.P. came in at 6.4% with spending higher by 11% and the price index up by 3.5%, March pending home sales rose by 1.9%; today – March personal income rose by an astounding 21.1% while personal spending gained 4.2% and this was mainly due to the stimulus checks, final U. of Michigan Consumer Sentiment Survey, April Chicago Purchasing Managers’ Index rose to 72.1 which was the highest since December 1983.

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.