Daily Market Notes: 5-6-2021

The gap between the value, re-opening types of stocks such as energy and financials versus  the former technology leaders reached a new level of disparity yesterday as the Dow began the day lower and then rallied to finish at a record high while the Nasdaq fell for sixth time in the past seven sessions. The S&P, as usual, got caught in the middle of the two and ended nominally higher after giving up most of its early gain.

The Dow was actually 94 points lower in the morning before getting positive around mid-day and then continued to keep pushing to the upside and ended at its highest level ever with a 97 point advance to 34,230. It was led in this endeavor by good gains in CAT, GS, CVX and JPM which have all done well lately.

The S&P was as high as a 23 point advance around 12 noon before a steady fade into the close left it barely positive with a 3 point close at 4167. It was hindered by the ongoing selloff in the large former technology leaders.

The Nasdaq really did a negative turnaround as it began with a strong gain of 120 right out of the starting gate and then proceeded to collapse into the close with a final 57 point decline down to 13,582. It was led by the usual recent weak ones such as AMZN, TSLA, PTON, MSFT and BKNG this week.

The Russell 2000 Index of small stocks did nothing with a 7 point decline to 2241 and the VIX eased back a little down to 19.15 on those Dow and S&P advances.

Technology stocks, which led the market’s blockbuster rebound in 2020, fell for the seventh straight day. The sector, one of 11 in the S&P, is up 4.6% this year primarily due to its strong showing in the first six weeks of the year which is now the third-smallest gain in the index after consumer staples and utilities. Energy companies are faring the best with a 38% advance so far this year, from very low levels last year.

The market’s mixed results came as investors remain focused on earnings reports, which have been better than expected. More than half of the companies in the S&P 500 have reported their results so far this earnings season, which show profit growth of 54%.

Stocks had been mostly pushing higher on expectations of an economic recovery and strong company profits this year as large-scale coronavirus vaccination programs help people return to jobs and normal activities after more than a year of restrictions. Massive support from the U.S. government and the Federal Reserve, and increasingly positive economic data, have also helped put investors in a buying mood, keeping stock indexes near their all-time highs.

Still, investors remain concerned about the potential for higher inflation, signs of which are already cropping up in higher prices for oil, lumber and other commodities. Remarks by Treasury Secretary Yellen suggesting that the Federal Reserve would have to raise interest rates to keep the economy from overheating, led to a late-afternoon sell-off on Tuesday. She later downplayed those remarks, and several Fed officials followed suit yesterday.

GM shares rose 4% after the company posted a solid quarterly profit compared to a year earlier, but also affirmed its full-year outlook even as the automaker, like much of its competition, contends with a chip shortage that is impacting production.

UAA jumped by 7% after the athletic apparel company reported better-than-expected results. ATVI also did well after its report. .

CZR put in the best gain for the S&P, up by 8% after the hotel and casino giant said more people are booking rooms as they get vaccinated and feel comfortable traveling and going out.

FB shares fell by 1% after the company announced its independent oversight board would continue to ban the former president from the platform.  Shares of exercise equipment company PLTN skidded by 15% after the company voluntarily recalled its treadmills after dozens of reports of injuries to children and pets, and at least one death. The $4,200 treadmill was the company’s biggest expansion beyond its traditional exercise bike program.

Despite all the talk about higher potential inflation, the yield on the 10-year Note eased back to  1.57%, down from 1.59% late Tuesday.

This week the earnings parade continues with the following, among others: yesterday  – CZR, TMUS, SPCE, ZG, ATVI, MTCH, LYFT, NYT, UAA and GM higher while HLT and MCFE were  lower; today – BKNG, WW, PYPL, VIAC, REGN, VIAC, K are higher while GDDY, RKT, ETSY, FSLY,UBER, TPR, W, NCLH are lower; tonight – WYNN, SQ, DBX, EXPE, BYND, GPRO, ROKU, PLNT, LYV, PTON, DDOG, AMC, SHAK, TRIP;  Friday – CIG.

Economic reports will be highlighted by the April jobs report on Friday: yesterday – March construction spending rose by 0.1%, the ISM April Manufacturing Survey slipped to 60.7; today – March factory orders rose by 1.1%, the highest since January, March trade deficit rose to a record $74.4 billion and final March durable goods orders; yesterday – ADP estimate for April jobs report was 800,000, ISM April Non-Manufacturing Survey came in at 62.7; today – weekly jobless claims broke to a new post-pandemic low of 498,000; Friday- April non-farm payrolls for which the estimate is one million with the unemployment rate down to 5.8%.

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.