Daily Market Notes: 5-11-2021

In another astounding but awful session yesterday to start the new week, the Dow began with a rip-roaring gain of as much as 315 points by 11am as it looked to extend its winning streak of five straight advances from last week and three consecutive record high closes to end the week. The problem was that it had to deal with terrible weakness from other indices and in the end it finally succumbed to selling from those areas.

For instance, at 3:35pm it was still ahead by 120 points until a late collapse finally resulted in a closing decline of 35 down to 34,743 which in and of itself would not seem to be such a terrible result. The only problem was that this 30-stock index could not compete with the terrible selling that was taking place elsewhere as for instance the S&P had the nerve to be higher by a fast 4 points before it really got swept under by the awful weakness in the technology sector and it began a steady slide, accelerated when these things happen into the close and finished with a final decline of a large 44 points down to 4188. And this was after it also had closed at a record high on Friday and had ended up for eight out of the past 10 weeks.

The Nasdaq was awful from the start and had nothing going for it as it just kept sliding lower as the session moved ahead and finished with a final large loss of 350 down to 13,401 for its worst showing in more than seven weeks. And need it be said that the technology and communication and cloud former highfliers were the main culprits as after a phenomenal run last year and early this year, they are coming back to reality as they are trying to get more reasonably priced with realistic price/earnings ratios.

The Russell 2000 Index of small stocks also had nothing going for it and just kept falling until it ended with a large decline of 59 down to 2212. The VIX loved this negative action and rose to 19.66 which now means that it will take a longer time to break its recent low of 16.35 from a few weeks ago when it appeared that after last Friday’s close it was about to do it. It would now appear that this event, if it does happen at all, will have to wait a while.

The market has been rallying this year on hopes that ongoing stimulus from the Federal Reserve keeping interest rates at all-time lows and continued support from the various governmental measures will keep consumers spending and economic growth gaining going forward.

There is the danger that inflation will rear its ugly head and eventually force the central bank to start lifting rates in order to deal with it as prices of commodities have been moving sharply higher this year. Items such as lumber, copper, crude oil and grains have been in steady uptrends leading to the possibility that something has to give on this front.

This is why the April C.P.I. and P.P.I reports later this week will be important to see if the large March increases have cooled off a bit last month.

Bond yields rose with the 10-year Note up to 1.61% from 1.58% late Friday, crude oil stopped going up from its rise after the Colonial Pipeline hack and ended at $64.85 a barrel while gold held steady at $1,837 an ounce after its best week in eight weeks recently and a recovery from its 2021 low of $1,675.

This week sees more earnings as the reporting season for the first-quarter starts to wind down and the lineup is as follows, among others: yesterday – DUK, SPG higher and MAR, TSN lower; today – PLTR now higher and OXY, NVAX, SPCE lower; tonight – EA, LMND, CHK, FUBO; Wednesday – TM, BMBL; Thursday – BABA, ABNB, DASH, YETI, COIN, BLNK and Dow component DIS; Friday – HMC.

Economic reports will have: today  – JOLTS job opening survey for March; Wednesday – April C.P.I.; Thursday – April P.P.I.; Friday – April retail sales, April industrial production and capacity utilization, mid-month May U. of Michigan Consumer Sentiment Survey.

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.