Daily Market Notes: 4-9-2021

Following a pattern that has established itself this week, the large former technology leaders once again re-asserted their leadership and this time they were helped by a decline in the 10-year Note yield down to 1.63%. As a result, the Nasdaq gained 140 points to 13,829 and is now around 2% away from its all-time high reached earlier this year after having fallen into a correction last month due to a sharp rise in yields in 2021 and the movement into the so-called value cyclical stocks such as energy, financials and travel-related issues which gained favor at the expense of the FANG-type issues.

But that dynamic has been reversing itself lately as for instance two of the mighty names in this group, namely FB and GOOG, actually reached all-time highs yesterday and MSFT is getting close to its best-ever level as well.

This resulted in the S&P reaching a new all-time high for the third time this week alone with a gain of 17 to 4097 as this group is still the most heavily weighted here. It was also the 20th record high close this year as well for the S&P, which is on track for its third straight weekly gain as well.

The Dow, on the other hand, actually had the nerve to start out as much as 104 points lower early in the session but by 12 noon it stuck its head into positive territory due to the strength in the Nasdaq and once again this was another example of the fact that when there is a dichotomy between these two indices, the market invariably goes in the direction of the latter because it is so much more heavily populated, such as 3,000 components versus only 30 for the former. And once again, it seems that whatever BA does, so does the Dow as this one was lower in the morning and once it turned positive in the afternoon, so did the Dow which ended up by 57 to 33,503. It was also helped by nice gains in GS and CRM as well.

The Russell 2000 Index of small stocks finally gained after two lower days and was ahead by 19 to 2242. It is up 13.6% so far this year, while the S&P is ahead by 9.1%.

Investors are showing cautious optimism about the economic recovery, especially in the U.S., where vaccine distribution has been ramping up and President Biden has advanced the deadline for states to make doses available to all adults to April 19th.

But the economy has much to do when it comes to recovery. The number of Americans who filed for weekly unemployment benefits last week rose again last week, up to 744,000,  as many businesses remain closed or partially shut down due to the pandemic.

Much of the economy is recovering, but employment needs to pick up in order for a full recovery to occur. The market will likely continue to be choppy as investors shift money to some of the sectors and companies hardest hit by the pandemic. They are also weighing signs of economic growth against the lingering threat of COVID-19.

In remarks to the International Monetary Fund yesterday, Federal Reserve Chair Powell said that a number of factors are putting the nation “on track to allow a full re-opening of the economy fairly soon.”

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: yesterday  – STZ lower; today LEVI higher and WDFC lower.

Economic reports will have: yesterday – weekly jobless claims rose again to 744,000 but continuing claims fell to 3.73 million which was the lowest since March 2020; Friday – March P.P.I. was up by 1% and excluding food and energy was higher by 0.7%. For a year over year comparison, it is now higher by 4.2% which could be a worrisome sign for the Fed. 

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.