Daily Market Notes: 4-5-2021

The market began the new month of April, which has been a historically good one, with a strong rally to new record highs last Thursday ahead of the Good Friday holiday and March jobs report.

Things opened higher and were able to maintain itself at the best levels and ended at a new record high of up 171 to 33,153 for the Dow. It was led in this endeavor by gains in AXP, DIS, MSFT and CRM.

The S&P made a late upward spurt to also end higher than it ever has been at a very strong advance of 47 to 4019. There is a statistic that says if the S&P advances by more than 5% during the first-quarter, which it did, then it has ended positive for the year 81% of the time going all the way back to 1928, so there is reason for optimism for 2021 as well.

The Nasdaq also made a very late upward spurt to end with a strong 233 point advance to 13,480. It was a continuation of a move back into the former technology high-fliers and the stay at home former leaders as well, many of which had fallen into bear markets with large declines off of their highs. The first group included nice gains in the FAANG group along with BKNG and MELI.

The Russell Index of small stocks also did well with a 33 point advance to 2253. And how about the VIX, which finally broke below support in the high 18’s area to end at the lowest level since early 2020 at 17.33 and if things keep going on the upside for the market, then the next stop would have to be the historically important 10 ultimate downside support level, at which point the market would become very overbought and susceptible to some sort of downside correction.

The upside was helped by some better economic data with weekly jobless claims rising a bit to 719,000 but the prior week was revised lower. February construction spending slipped a bit to negative 0.8% most likely due to very cold and snowy weather during that month while the March ISM Manufacturing Survey rose to a 37-year high at 64.7.

The technology stocks benefited from another drop in bond yields, which have been the driving force for the market for several weeks. The yield on the 10-year Note fell to 1.69% from 1.73% the day before. Higher bond yields make stocks seem more expensive by comparison, and tech stocks are among the most expensive after their significant rise last year.

Companies that would benefit from greater sales of electric vehicles rose, a day after President Biden outlined various measures to support their use as part of his massive infrastructure plan. Part of that plan includes installation of thousands of additional charging stations around the country. Electric vehicle charger operator CHPT gained 12%.

Investors continue to monitor news about how well the U.S. economy is recovering from the coronavirus pandemic now that millions of vaccines are being administered daily to Americans as well as around the world.

Consumer sentiment has been improving along with construction spending and other measures. The improving economy is prompting investors to shift more money into companies and sectors that will benefit from people getting back to some semblance of a pre-pandemic normal.

The market has been churning while dealing with that shift as beaten-down sectors like airlines and industrial companies start to recover.

While investors are optimistic that things will recover soon, there’s still a lot of economic pain to go around.

Airlines have been making gains this year as more people bet on a budding recovery for travel, but the industry still faces turbulence ahead. Discount carrier Frontier Airlines (ULCC) underwhelmed on its first day of public trading. The Denver-based airline opened at $18.61, below the low end of a $19 to $21 price target and closed at $18.85.

This is the week before the flood of first-quarter earnings start to appear next week and is a light one with the following lineup: Tuesday – PAYX; Wednesday – LW; Thursday – CAG, STZ, LEVI, WDFC.

Economic reports will have: today – March ISM Services Index rose to 63.7 which was the highest in around 30 years, February durable goods orders final was lower by 1.2%, February factory orders slipped by 0.8%; Tuesday – February JOLTS (job openings) report; Wednesday – release of minutes from last month’s Fed meeting, February trade deficit; Thursday – weekly jobless claims; Friday – March P.P.I. report. 

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.