Monday was a tale of two markets. Cyclical issues followed through on Friday’s rally while technology stocks reversed and retraced those gains, notes Jon Markman of Pivotal Point.
In the end the S&P 500 closed back at the 3,821 support level so there was no resolution. I suspect that deeply oversold tech stocks bounce hard Tuesday while cyclicals take a breather. If the S&P 500 does slump the next key support level is 100 points lower at 3,721.
President Biden's $1.9 trillion stimulus plan is scheduled for a final Congressional vote this week and is expected to shower money onto consumers—a major reason that Mastercard (MA) and Visa (V) almost broke out. Techs were pinned down by rising government bond yields, which sounds ridiculous but appears to be the case.
The Dow hit a new record high, rising 1% to 31,802.44. The S&P 500 dipped 0.5%, and the tech-heavy Nasdaq 100 slumped 2.9%, a stunning 370-point loss. On the other side of the ledger, utilities and materials were among the biggest gainers.
Breadth was about even between advancers and decliners and there were 1077 new highs vs. 56 new lows. Topping the new highs list included ViacomCBS (VIAC), Discovery (DISCA), The Liberty Braves Group (BATRA), International Paper Co. (IP), Ingersoll Rand (IR), Nucor Corp. (NUE), and Omnicom Group (OMC). Weird vanguard, especially since Viacom is rising because it is the wrapping paper for the new Paramount Plus video service, which is like Disney Plus but with less and worse content.
February’s strong jobs gain was the latest in a slew of solid economic reports suggesting the US economy continues to recover from the 2020 recession, according to a note from Stifel Monday.
"While no one data point can signal the US economy is out of the woods, coupled with recent gains in auto and retail spending and manufacturing, as well as robust housing market activity, ongoing positive monthly job creation will work to boost confidence and drive higher expectations for more solid growth in the coming months and quarters," the report said.
Good point but remember that government bonds prefer misery because it keeps a cap on their mortal enemy, inflation. So, the better the news for the economy, the worse for bonds and tech.
The bright side: Accelerating US economic growth has been the most significant driver of equity purchases by households during the past 30 years, according to Goldman Sachs. Net equity buying by households outpaced inflows from other sources when real yields and breakeven inflation were rising during that period, according to the brokerage.
Goldman lifted its household net equity demand outlook for 2021 to $350 billion from $100 billion and projects a doubling of corporate equity demand from the prior year to $300 billion. Inflows into equity mutual funds and exchange-traded funds totaled $163 billion since the start of February, the largest five-week inflow on record in absolute dollar terms, according to Goldman analysts.
In company news, Ross Stores (ROST) said it opened seven stores in five states in February and March; shares jumped 6%. XpresSpa Group (XSPA), a health-and-wellness company, said Monday it is collaborating with United Airlines (UAL) to open a testing facility at Houston's George Bush Intercontinental Airport; XpresSpa shares rose 9%.
Learn more about Jon Markman at Pivotal Point.
